Appeal of Maine Regulatory Consulting Contract Threatens delay in Adult Use Licensure

Any business that wants to cultivate, process or sell adult use marijuana in Maine will require a license from the State to do so. No licenses can be issued until the State issues final regulations governing the operation of the industry, including, critically, the rules for how to apply for and obtain a state license.

A new development potentially delays the implementation of those rules, which could lead to significant delay in the awarding of adult use marijuana licenses by the State.

The Maine Department of Administrative and Financial Services (“DAFS”) announced in December that it had retained BOTEC, a California based consulting company to assist it with drafting those regulations, after a competitive bidding process.

The regulations which BOTEC was engaged to help draft are “major substantive” rules under Maine law, and thus must be approved by the Maine legislature before taking effect. BOTEC was slated to complete its drafting process by April 30, 2019. The Legislature’s First Session, as a matter of Maine constitutional law, ends on the third Wednesday of June, this year meaning June 19. If the regulations were delivered to the Legislature in May, 2019 this would give the Legislature a narrow but still workable window to review and approve the regulations.

However, another bidder for the DAFS contract for regulatory consulting services has appealed the decision to grant the contract to BOTEC. DAFS has announced that it will hold a hearing on appeal on February 26, 2019, and that in the meantime, “BOTEC’s contract with the state is essentially on hold until the appeals process is over,” as the Associated Press reports the acting DAFS Commissioner saying.

This delay could potentially mean that DAFS might fail to complete drafting regulations in time for the First Session of the Legislature to approve the regulations. The Second Session of the Legislature does not convene until January, 2020.

Thus, depending on how the DAFS appeal process plays out, Maine may now be faced with the prospect of not having final marijuana regulations, which will include a process for obtaining the required state license, until early 2020. This would of course delay first sales until some point later in 2020, quite possibly until into the third or fourth quarter of that year.

The Drummond Woodsum Regulated Substances Group will continue to monitor the situation and status of this appeals process.


Update as of 1/28/19

Last Friday, we reported on a potential delay in Maine’s adult use marijuana regulations, including rules and processes for obtaining state licenses. This is an update to that alert, based on new information.

The Maine Department of Administrative and Financial Services (“DAFS”) had been planning to hold a hearing on February 26, 2019, to hear the appeal of one of the losing bidders for a state contract to assist DAFS in writing the regulations that would govern the adult use marijuana commercial system in Maine.

DAFS has now decided to rescind the initial award of the contract along with the underlying Request for Proposals and to essentially re-start the process of hiring a consultant to help draft the adult use marijuana rules. The Portland Press Herald quotes a deputy commissioner of DAFS as saying that “the second consulting solicitation would have a tight deadline for responses, and require the work to be done in several weeks, not months.”

BOTEC, the winning bidder in the first round, expressed an intent to re-submit a bid and publicly expressed optimism that it could complete its work in time for the Legislature to approve the rules before the First Session adjourns on June 19. If the Legislature fails to approve the rules by that date, legislative approval, and thus the effectiveness of the rules, will wait until January 2020, at the earliest.

DAFS’ decision to take this course of action constitutes a marginal improvement over the appeal process the state faced as recently as last Friday, since it allows DAFS to better control the timing of delivery proposed regulations.

Nonetheless, this development still presents significant risks that regulatory approval will be pushed back at least another half-year.