How to sell open source technology to the government

A Billion Dollar Problem

As governments legalize cannabis, they create billion-dollar industries. A trade-off for this massive economic value-add is the need for regulatory tracking technology. This technology is typically dominated by large, proprietary players. In commercial cannabis, competitors come from pharmaceuticals and private equity.

Governments typically get access to this technology through the procurement bid process, where the budget of these firms shines through. However, a powerful alternative exists for savvy entrepreneurs: open source software.

This essay aims to provide a roadmap for how you can leverage open source principles to successfully bid and win these contracts. The OpenTHC team’s experience is in the cannabis industry. We believe our work and products can serve as a model for the next generation of entrepreneurs to collaborate using OpenTHC technology.

The Open Source Advantage

Governments have more problems than they can hope to solve. Governments are composed of people. People value trust, transparency, and collaboration. But, commercial practices often work against these values in order to make vendors more competitive. Everybody knows the “black box” nature of proprietary software gives users little insight to understand how the software works. It's harder to see how this applies to the work that is done inside of the software.

Governments inherit the problems when they buy proprietary software. An extreme example of this is Washington State’s inability to adequately track lab result reports. Without the ability to understand what was missing from their multiple contracts, they created in-house a custom traceability system. This saved them money in the short term. However, their solution still fails to track lab results the right way. That is a serious threat to the public’s health. Many states in the U.S. share the same problem Washington State has, but have not had markets operating for long enough to give government auditors time to catch these crucial issues. Mediocre technology has frustrated many activists, and fosters distrust in the industry.

It would have been a lot easier if the software chosen by the government could be managed or maintained by officials adept in software management rather than the procurement process. Resilience to vendor lock-in is another opportunity open source brings to the table. If another vendor was able to contract with Washington State to fix-forward their existing project, then the State could stop sinking costs before auditors from the Joint Legislative Audit and Review Committee (JLARC) needed to step in. The competitive benefit from open source means lower bids, and accelerated development. Without the need to start over, Washington can put together a more cost effective solution and eliminate disruptive migrations. This is the exact philosophy that drives our work.

OpenTHC is a leader in the cannabis industry as the top open cannabis standard, and the only participant that maintains open technology for all participants in the commercial market. In 2014, we began our journey serving a diverse array of cannabis licensees.

Most licensees have similar regulatory reporting requirements. This can be referred to as “seed-to-sale”, “traceability”, or “compliance” requirements. All these terms mean the same thing: the paperwork a cannabis business must do to meet the legal requirements of the license issued to them. This typically means some degree of inventory, sales, crop, and lab result reporting. The OpenTHC environment handles all of these requirements, and supports more with its flexible architecture.

OpenTHC did not grow solely from the experience working with licensees. Our team participates in the political process of the cannabis industry. We act in alignment with other ethical, trustworthy, professional, and scientific organizations. No matter who we are working with, we make an effort to honor our values. OpenTHC is an open source participant. We observe the good-faith obligations that all open source actors should follow. Additionally, we always act in the best interests of the plant, and its patients.

Three-Leaf Plan

Since 2020, our team has participated in multiple procurement bids. We have not secured a final contract. But, this process gave us an invaluable education. We are sharing this playbook because the final step – winning the contract – is an opportunity for the right partner.

OpenTHC identified three steps to getting involved as your government's traceability vendor:
1. Study the environment.
2. Organize business partners, stakeholders, and public servants.
3. Execute the vision.

Study

• Evaluate the political structure
• Understand regulatory, technical, and business Requirements
• Read published material

You probably know better than most what the value of “standing on the shoulders of giants” is. It is a fundamental idea of open source movements. What value we have been able to create originates from our ability to listen to other people about complex problems. Material investment in this step is the building of subject matter expertise. Expertise that requires a working knowledge of the environment in which cannabis exists.

Building subject matter expertise naturally includes legal and political realities. Internalize the phrase “everything is politics.” These realities mean different things depending on government composition. In the U.S., most traceability projects enjoy a competitive bidding process. The democratic privilege of a competitive bidding process is not available anywhere, and it is becoming more rare. We acknowledge this as a situation where cannabis regulation may be a low priority. Do not underestimate the Overton window. Fight for your values. Let this plant that has helped so many patients find blessings far beyond what we can immediately see.

It is crucial to familiarize yourself with the way your government buys goods and services. We have seen this referred to as "procurement", "bidding", and "contracting". As the regulation materializes through the political process, the government will change in response to legal changes. New government offices may emerge, or existing agencies may see an expansion of their authority. Procurement is an important tool in the regulator’s tool belt. It allows them to access material and expertise not available to them in house. Traceability projects often have inter-agency agreements in their contracts. This is a function of the intelligence value they generate. The primary cannabis regulator may partner with other departments to buy the traceability solution. These agencies may range from general services, I.T., or their department of revenue.

We have observed how the government's ability to buy services has an outsized effect on the industry. The place where “all the bodies are buried” is always the technical requirements. In 2014, BOTEC Analysis delivered governance recommendations to the Washington State Liquor and Cannabis Board (WSLCB). This single piece of intelligence has had a ripple effect on the interfaces of all providers: BioTrack, LeafData, METRC, and OpenTHC. For instance, Product Type conventions resiliently remain close to BOTEC’s original definition in every State. This underscores the importance of understanding the procurement process. For early Washington vendors, BOTEC’s recommendations were a crucial clue as to what success looked like to the State. It gave vendors the ability to dazzle the State with data dashboards, but hid the architecture that kept the State from meeting their legal obligations.

The hidden complexity behind the procurement process is the technical requirements. Everything that is not about the project subject matter in the requirements is going to be about the government’s needs. From a technical standpoint, it will be about an underlying specification. The government understands the value common specifications have. It is harder to internalize faith in a “new” specification when it does not come from an institution they already respect. 80% of this responsibility falls to actors like the OpenTHC Foundation. Abusing the Pareto Principle, the “other 80%” belongs to the bidding vendors. A straight line exists between formal requirements, the OpenTHC specification, and the code. Any response should demonstrate mastery of those connections. Anything less may lead to an erosion of trust. In the age of A.I., having the ability to demonstrate you are an expert shapes how trust will develop.

Our team continues to learn and study the political process. In alignment with the open source standards of transparency, we publish all responses we make to procurement bids. Our process writing these bids has been iterative. The quality and organization in our most recent responses are worth your time. We mark our responses with a Public Domain license. Our sincere hope is that more entrepreneurs use our responses as a baseline for their own submissions. OpenTHC is committed to continuing to elevate open source technology for the public benefit.

Organize

• Find business allies (partners, subcontractors, technology)
• Find cannabis stakeholders
• Lobby everyone

Earlier you tolerated our musing on “standing on the shoulders of giants.” It can be helpful to remember how relative that can be. The shoulders we stand on also take advantage of another giant. Necessarily, there is always some bigger giant. Before I had formally joined OpenTHC, I met one of David Busby’s mentors, John Sechrest. John is important to our story because he helped inform us that finding the right business partner carries the same peril as finding a life partner. Partnering with the right people will have a huge impact on your business.

Your team has to understand the industry thoroughly. They also need to be the kinds of people that are patient and empathetic to a broad range of end-users. Cannabis stakeholders can be anyone. State government employees, medical patients, salt-of-the-earth farmers, and multi-Ph.D holding scientists. A comprehensive contract should account for these different needs. Furthermore, people that handle their compliance paperwork must understand those needs.

This adds a lot of responsibilities to all levels of your organization. A cash-strapped startup may have trouble finding talent that can perform under that uncertainty. Silicon Valley popularized venture-funded models. These models tend to distract leadership from the core business activities as they chase funding rounds. Additionally, employees take on increased risk because an exit event is unlikely. There is plenty to discuss about the risks associated with traditional business models. In cash-lean scenarios, we envision cooperative business models as a pathway to success.

Procurement projects often allow the use of subcontractors. Subcontracting is a valid way to offset the project's complexity. In exchange, you buy subject matter expertise. In the United States, many state governments provide lists of verified contractors. This may include special classifications like: minority-owned, veteran-owned, or women-owned businesses. None of these special classes necessarily make one contractor better over another, but may add value based on the political or process needs of a state.

Remember, the long history of the industry has been inequitable to many groups. Both throughout prohibition and following commercialization. Government stakeholders have awareness of these kinds of problems. Government bodies sometimes require the use of these verified contractors. Again, we emphasize the importance of finding the right business partner to strengthen your organization. The competitors in this sector are likely to be well-funded pharmaceutical industry players. Position your business to officials as a different organization.

Being seen as an expert by the government means being comfortable talking to them. The cultural baggage behind the word "Lobbying" is out of our scope. Yet, it covers the entire spectrum of activity people use to influence government. Procurement projects typically have strict anti-corruption requirements. This is to protect the evaluation committee from bad-faith, and uncompetitive influence. You need to firmly understand the project's competitive requirements. Competitive and good-faith lobbying strategies seek to influence "higher order" government decision makers. Here are a few high-level strategies already in-play in the cannabis industry:

The first strategy is direct communication with decision makers. These are highly-underused civic activities. Things like making public comments during board meetings, attending meet-and-greets with relevant officials, and writing letters. This level of lobbying is high-effort and low-impact when your contract may not be handled by the officials directly. However, the face-time builds visibility and familiarity with the members of government, giving a face and voice to your company that can help down the road.

Another approach is joining professional organizations that lobby and organize based on shared stakeholdership. Think organizations like local craft cannabis groups, to cannabis advocacy groups, like NORML. The ideological spectrum of these organizations can be broad. Choosing your affiliation is just as important as your choice of business partners. Many of these organizations will take on a broader agenda than the topics you wish to influence. Once publicly aligned with an organization your staff should be prepared to support, or at least acknowledge these other topics. These organizations can hold enormous potential as political incubators once you’re affiliated with them.

The final lobbying scheme takes everything we discussed to a logical conclusion. Equipped with enough capital, willing competitors can target and influence government decision makers. Leveraging professional lobbying firms, competitors will nudge lawmakers to cement the law and project requirements in their favor.

Affiliate with organizations that take stewardship of the plant, consumers, and patients seriously. Stewardship is not a marketing campaign that has a fixed budget. Real stewardship to fellow stakeholders must be elevated to an organizational value. Just like the importance of OpenTHC's stewardship as an open source participant. This is the tried-and-true pathway towards making inroads with cannabis stakeholders.

Execute

• Identify and respond to the procurement process
• Win the bid
• Orchestrate the solutions and technology

In many ways, this is the most straightforward part of the journey. Not because the work is easy, but because studying and organizing will clarify what you need to do. Submitting our first bid felt akin to finishing a heavy load of final exams. But, it is the stage where everything theoretical we have discussed finally becomes concrete. Identify where the committee hosts the bid announcement and documents. Unfortunately many U.S. procurement systems are these fairly byzantine websites only suitable for sending email notifications and hosting Microsoft Word documents. Sometimes states have more than one. We have documented each state's profile on our Wiki and add new profiles of other governments as we learn about them.

Bid responses generally require more than one document. You must study the bid notice and compile a list of all required documents. This will help you strategize the response. Ensure identification of all required responses. Failure to include a single required response document may disqualify your bid as non-responsive. The evaluation committee has a lot of discretion in these judgements.

“biz#32”, the project management issue for a 2023 opportunity in Massachusetts.

Generally, "marketing materials" from your business may accompany required response documents. This is an enormous opportunity to speak directly to decision makers. There are many creative strategies to take in this direction. We’ve refined the response prose our team has work-shopped throughout our bid career, and we welcome your team to it. A response should outline the unique vision you and your team have. It is an opportunity to highlight your subject matter expertise, and your community. The prose should describe the system as the government would see it. Use their vocabulary to describe it. This document should also have high-level delivery timetables, and a section called "Requirements." Delivery timetables are centered around the time after the contract is signed. Delivering the core project outside of a 90-day timeframe is generally seen as a non-starter by evaluation committees. However, include support windows and non-core deliverables in your timetable. The requirements section should re-acknowledge everything important the bid response requires. For instance, many bids require a technical requirements spreadsheet included in the response. This prose section would acknowledge that your bid includes that document, and meets those requirements.

Procurement committees generally use a scoring rubric on vendor bids. Committees may invite bidders to present their vision if you score high enough. This face-to-face opportunity gives teams an opportunity to put a voice to vision. By using OpenTHC's Docker environment you can demo a system ready to go off of the shelf. Prioritize two goals for the evaluation: appearing professional, and de-risking your bid.

It is uncertain how long it will take for the committee to reach a conclusion. Sometimes bids never materialize into a contract because government priorities change. Generally, governments follow the same business cycles everyone else does. You can expect a decision somewhere between 90 days, to the end of their fiscal year. The accepted bid's team can look forward to a contract negotiation period of about 30 days. Whether you win the contract or not, just by submitting a professional bid you have entered the arena. You are now a serious contender. Get your demo online, and be ready for their call or email.

A Call for Champions

So much has changed since I joined the industry. What once felt like a party early on in my career exchanged for the everyday and familiar. For years, OpenTHC has dedicated ourselves to this work. Our crew did not build just another product. We built a public utility. Every line of code, every bid document published, and every conversation we had emerged from the primary goal of adding value to our shared community. This foundation exists for you. It exists for everyone. Our team has carried this torch to the base of the mountain. We can see the summit. But, the truth is that we can only go so far. So much has changed in our community. It is hard to say what the summit will look like tomorrow. The final ascent to see an open system used for the public good may require a new team with fresh energy to take the lead.

The right champion of transparency in technology sees us, and understands this is more than another business opportunity. The real goal isn’t the contract itself. It’s about making the government more transparent. It’s about giving people the tools they need to fix their own problems. It’s about stewardship.

So, this is our call to you: Take what we’ve built and make a run for it. Submit a bid. You may not win, and that’s okay. The reality is that changing government is incredibly hard. Every bid which centers on collaborative, open source technology is a victory. By submitting a professional bid, you force a conversation about transparency. You add to the public library of knowledge. You show your government what is possible. You embody the long legacy of open source. Every step adds value to our community. This is a success we would proudly share after having carried the torch with love and effort. Please, help us carry it further.

Authored by: Matthew Walther