Committee Blog: Poor Project Planning – A Costly Mistake for Cannabis Entrepreneurs

by NCIA’s Facilities Design Committee

Facility layout and design are important components of overall operations, both in terms of maximizing the effectiveness and efficiency of the process(s) executed in a facility, and in meeting the needs of personnel. Prior to the purchase of an existing building or investing in new construction, the activities and processes that will be conducted in a facility must be mapped out and evaluated to determine the appropriate infrastructure and flow of processes and materials. In cannabis markets where vertical integration is the required business model, multiple product and process flows must be incorporated into the design and construction. Materials of construction and critical utilities are essential considerations if there is the desire to meet Good Manufacturing Practice (GMP) compliance or to process in an ISO certified cleanroom.

All these activities require a well-thought-out and documented project plan. Unfortunately, many cannabis entrepreneurs that embark on the journey into the industry fail to properly plan, and furthermore fail to understand that proper project planning is the most critical stage of the entire project. Inadequate planning is the primary reason projects spin out of control, take longer to execute, cost more money, and ultimately fail. Proper and effective project planning involves comprehensive mapping and organizing of project objectives and goals, identifying tasks and deliverables, maintaining schedules, proper allocation of resources, and defining roles and responsibilities of team members before the project even gets off the ground. Most problems that lead to project failure can be avoided with proper project planning.

Why is project planning so important? The answer is simple. Proper project planning:

Ensures project performance and success.
- When tasks, deadlines, deliverables, and responsibilities are defined upfront, there is a better chance the project will run smoothly, efficiently, and be successful.
Saves money (and keeps investors happy).
- Failed projects are expensive. Rework and delays may lead to project scope creep which subsequently leads to going over budget and missing deadlines.
Improves team communication.
- When everyone is on the same page and understands the objectives and expectations, projects are effective and timely. Routine team meetings to discuss potential roadblocks to deadlines are key to a project’s success.
Ensures resources are properly allocated.
- Identifying team members with the appropriate skillsets to lead and manage the various aspects of a project is critical to the success of the project. Assigning an overall project manager is highly recommended.
Project status is tracked and documented.
- Documenting target dates, deliverables, and metrics is critical for keeping a project on track. This allows everyone to be aligned and informed on tasks, timelines, expectations, and workflow.

There are several considerations when designing a cannabis operation, whether it is a grow room or a product manufacturing facility. Regardless of what type of facility is needed or desired, applicable local, federal, and international regulations and standards must be reviewed to ensure proper design, construction, and operation, as well as to guarantee the safety of employees.

Materials of Construction

The materials of construction for interior work surfaces, walls, floors, and ceilings should be fabricated of non-porous, smooth, and corrosive resistant surfaces that are easily cleanable to prevent harboring of microorganisms and damage from chemical residues. Flooring should also provide wear resistance, stain, and chemical resistance for high traffic applications. Interior and exterior (including the roof) materials of construction should meet the requirements of the International Building Code (IBC), the National Fire Protection Association (NFPA), Occupational Safety and Health Administration (OSHA), and other applicable building and safety standards, particularly when the use, storage, filling, and handling of hazardous materials occurs in the facility.

Utilities

Critical and non-critical utilities need to be considered in the initial planning phase of a facility build out. Critical utilities are the utilities that when used have the potential to impact product quality. These utilities include water systems, Heating Ventilation and Air Conditioning (HVAC), compressed air, and pure steam. Non-critical utilities may not present a direct risk to product quality, but are necessary to support the successful, compliant, and safe operations of a facility. These utilities include electrical infrastructure, lighting, fire detection and suppression systems, gas detection, and sewage.

Water

Water quality, both chemical and microbial, is a fundamental and often overlooked critical parameter in the design phase of cannabis operations. Water is used to irrigate plants, for personnel handwashing, potentially as a component in compounding/formulation of finished goods, and for cleaning activities. Water quality should be tested and monitored to ensure compliance to microbiological and chemical specifications based on the chosen water type, the intended use of the water, and the environment in which the water is used. Overall water usage must be considered during the facility design phase. In addition to utilizing water for irrigation, cleaning, product processing, and personal hygiene, water is used for heating and cooling of the HVAC system, fogging in pest control procedures, and in wastewater treatment procedures. A facility’s water system must be capable of managing the amount of water required for the entire operation. Water usage and drainage must meet environmental protection standards. State and local municipalities may have water usage limits, capture and reuse requirements, and regulations regarding runoff and erosion control that must also be considered as part of the water system design.

Lighting

Lighting considerations for a cultivation facility are a balance between energy efficiency and what is optimal for plant growth. The preferred lighting choice has typically been High Intensity Discharge (HID) lighting, which includes metal halide (MH), and high-pressure sodium (HPS) bulbs. However, as of late, light-emitting diodes (LED) systems are gaining popularity due to increased energy saving possibilities and innovative technologies. Adequate lighting is critical for ensuring employees can effectively and safely perform their job functions. Many tasks performed on the production floor or in the laboratory require great attention to detail. Therefore, proper lighting is a significant consideration when designing a facility.

HVAC

Environmental factors, such as temperature, relative humidity (RH), airflow, and air quality, play a significant role in maintaining and controlling cannabis operations. A facility’s HVAC system has a direct impact on cultivation and manufacturing environments, and HVAC performance may make or break the success of an operation. Sensible heat ratios (SHRs) may be impacted by lighting usage and RH levels may be impacted by the water usage/irrigation schedule in a cultivation facility. Dehumidification considerations are critical to support plant growth and vitality, minimize microbial proliferation in the work environment, and to sustain product shelf-life/stability. All of these factors must be evaluated when commissioning an HVAC system. HVAC systems with monitoring sensors (temperature, RH, and pressure) should be considered. Proper placement of sensors allows for real-time monitoring and a proactive approach to addressing excursions that could negatively impact the work environment.

Compressed Air

Compressed air is another, often overlooked, critical component in cannabis operations. Compressed air may be used for a number of applications, including blowing off and drying work surfaces and bottles/containers prior to filling operations, and providing air for pneumatically controlled valves and cylinders. Common contaminants in compressed air are nonviable particles, water, oil, and viable microorganisms. Contaminants should be controlled with the use appropriate in-line filtration. Compressed air application that could impact final product quality and safety requires routine monitoring and testing.

Electrical Infrastructure

Facilities should be designed to meet the electrical demands of equipment operation, lighting, and accurate functionality of HVAC systems. Processes and procedures should be designed according to the requirements outlined in the National Electrical Code (NEC), Institute of Electrical and Electronics Engineers (IEEE), National Electrical Safety Code (NESC), International Building Code (IBC), International Energy Conservation Code (IECC), and any other relevant standards dictated by the Authority Having Jurisdiction (AHJ).

Fire Detection and Suppression

Proper fire detection and suppression systems should be installed and maintained per the guidelines of the National Fire Protection Association (NFPA), International Building Code (IBC), International Fire Code (IFC), and any other relevant standards dictated by the Authority Having Jurisdiction (AHJ). Facilities should provide standard symbols to communicate fire safety, emergency, and associated hazards information as defined in NFPA 170, Standard for Fire Safety and Emergency Symbols.

Gas detection

Processes that utilize flammable gasses and solvents should have a continuous gas detection system as required per the IBC, Chapter 39, Section 3905. The gas detection should not be greater than 25 percent of the lower explosive limit/lower flammability limit (LEL/LFL) of the materials. Gas detection systems should be listed and labeled in accordance with UL 864, Standard for Control Units and Accessories for Fire Alarm Systems and/or UL 2017, Standard for General-Purpose Signaling Devices and Systems and UL 2075, Standard for Gas and Vapor Detectors and Sensors.

Product and Process Flow

Product and process flow considerations include flow of materials as well as personnel. The classic product and process flow of a facility is unidirectional where raw materials enter on one end and finished goods exit at the other. This design minimizes the risk of commingling unapproved and approved raw materials, components, and finished goods. Facility space utilization is optimized by providing a more streamlined, efficient, and effective process from batch production to final product release with minimal risk of errors. Additionally, efficient flow reduces safety risks to employees and an overall financial risk to the organization as a result of costly injuries. A continuous flow of raw materials and components ensures that supplies are available when needed and they are accessible with no obstructions that could present a potential safety hazard to employees. Proper training and education of personnel on general safety principles, defined work practices, equipment, and controls can help reduce workplace accidents involving the moving, handling, and storing of materials.

Facilities Management

Facilities management includes the processes and procedures required for the overall maintenance and security of a cannabis operation. Facilities management considerations during the design phase include pest control, preventative maintenance of critical utilities, and security.

A Pest Control Program (PCP) ensures that pest and vermin control is carried out to eliminate health risks from pests and vermin, and to maintain the standards of hygiene necessary for the operation. Shipping and receiving areas are common entryways for pests. The type of dock and dock lever used could be a welcome mat or a blockade for rodents, birds, insects, and other vermin. Standard Operating Procedures (SOPs) should define the procedure and responsibility for PCP planning, implementation, and monitoring.

Routine preventative maintenance (PM) on critical utilities should be conducted to maintain optimal performance and prevent microbial and/or particulate ingress into the work environment. Scheduled PMs may include filter replacement, leak and velocity testing, cleaning and sanitization, adjustment of airflow, the inspection of the air intake, fans, bearings, and belts, and the calibration of monitoring sensors.

In most medical cannabis markets an established security program is a requirement as part of the licensing process. Facilities should be equipped with security cameras. The number and location of the security cameras should be based on the size, design, and layout of the facility. Additional cameras may be required for larger facilities to ensure all “blind spots” are addressed. The facility security system should be monitored by an alarm system with 24/7 tracking. Retention of surveillance data should be defined in a Standard Operating Procedure (SOP) per the AHJ. Motion detectors, if utilized, should be linked to the alarm system, automatic lighting, and automatic notification reporting. The roof area should be monitored by motion sensors to prevent cut-and-drop intrusion. Daily and annual checks should be conducted on the alarm system to ensure proper operation. Physical barriers such as fencing, locked gates, secure doors, window protection, and automatic access systems should be used to prevent unauthorized access to the facility. Security barriers must comply with local security, fire safety, and zoning regulations. High security locks should be installed on all doors and gates. Facility access should be controlled via Radio Frequency Identification (RFID) access cards, biometric entry systems, keys, locks, or codes. All areas where cannabis raw material or cannabis-derived products are processed or stored should be controlled, locked and access restricted to authorized personnel. These areas should be properly designated “Restricted Area – Authorized Personnel Only.”

Future Expansion

The thought of expansion in the beginning stages of facility design is probably the last thing on the mind of the business owner(s) as they are trying to get the operation up and running, but it is likely the first thing on the mind of investors if they happen to be involved in the business venture. Facilities should be designed so that they can be easily expanded or adjusted to meet changing production and market needs. Thought must be given to how critical systems and product and process flows may be impacted if future expansion is anticipated. The goal should be to minimize downtime while maximizing space and production output. Therefore, proper up-front planning regarding future growth is imperative for the operation to be successful and maintain productivity while navigating through those changes.

Member Blog: Designing and Purchasing a Greenhouse with Rebates and Incentives in Mind

By Josh Holleb, Co-Founder and Co-Owner of Ceres Greenhouse Solutions

What if the highest performing cultivation facility isn’t the most expensive?

The highest producing cultivation facility is probably the most expensive, right? Highly productive and efficient cultivation facilities can be more financially accessible than you may think. Rebates and incentives provide business owners the option of turning otherwise high dollar projects into affordable, highly efficient grow operations.

Rebates/Incentives

An Incentive is a provision intended to motivate further growth, while a Rebate is a refund or discount that is returned to the client after the purchase has been made.

Rebates and incentives can be hard to classify because the process varies between utility providers. That being said, it is worth understanding the basics of how they work and how they can influence your overall construction budget.

Utility providers often have programs in place to incentivize the purchase of higher quality, and more efficient materials and equipment for your facility. These programs allow the utility to achieve their stated goals of energy efficiency, while providing power to more customers without having to increase their infrastructure/capacity. Because your efficient equipment is beneficial to the utility they may pass some of their savings on to you.

LED Lighting

LED lighting is the easiest place to start. Most utilities have an “efficient lighting program”, which is usually offered as an incentive. This means you submit your lighting plan and the lights you are going to use, and they compare your lighting layout and power needs (how much power your efficient LED plan will use) vs. a standard HID light, usually a double ended 1000 watt HPS bulb. Based on the equation they use, we have seen between 25% and 100% of the cost of the lighting being paid for by the utility. Often, this is paid upfront by the utility company (the client doesn’t have to pay full price and wait for a check). Once the facility is operational the utility will make sure the lights are being used as described.

Building Envelope and HVAC

Building envelope and HVAC equipment are also eligible for savings, but this usually comes in the form of a rebate. Normally, a utility will set a baseline for a greenhouse (i.e. all walls 8 mm polycarbonate, R-1.4 insulation value), and then compare the operational cost savings of a more efficient design vs. the baseline to calculate a rebate amount. We have seen rebate amounts between $100k – $750k for high efficiency sealed greenhouse facilities (up to a 15% reduction in costs on a new build).

The Design Process

It is important to know if rebates/incentives are available before beginning the design process for your cultivation facility. Understanding the entire process of design, build, and rebates/incentives when designing and budgeting a new cannabis grow can have a huge effect on capital expenditures. Sunlight grown cannabis with indoor environmental controls is emerging as the best way forward for cultivators looking to grow high-quality cannabis with lower operating costs, and rebates/incentives are a great way to help make the best option a more affordable one.

The most efficient option?

While sealed greenhouses tend to fall in the middle in terms of capital expenses, when compared to a newly built indoor grow (most expensive) and a vented greenhouse (least expensive), much of the equipment required to build a highly efficient sealed greenhouse can be expensive.

A highly insulated, well designed, sealed facility can be an expensive option because both the value of the structure and the systems within it are of the highest quality. An uninsulated sealed greenhouse, on the other hand, might cost less money upfront, owing to cheaper materials and possibly lower quality systems. This is where incentives/rebates can become a major cost-saving avenue for your bottom line, allowing you to build the best facility at a more affordable cost. Once built, the higher quality structure will continue to save money in operational costs–a win-win.

Conclusion

In mature cannabis markets, smokable flower continues to demand high prices, especially high-quality flower. Consumers and brokers have learned to recognize quality, and price per pound has adjusted accordingly. The ability to produce high-quality flower, at a low cost per pound, is the future of cannabis production.

Given the accessibility of rebates and incentives and the general trajectory of the market, we are living in a moment where the highest quality option may also be the most affordable.

Josh Holleb is co-founder, co-owner, and senior solutions architect at Ceres Greenhouse Solutions. Since starting at Ceres 7 years ago, Josh has created the cannabis division, bringing more than a decade of experience in both construction, cultivation, and dispensary management. Josh approaches his job with an interdisciplinary understanding of systems, architectural design, and problem-solving. His goal is to create a whole-systems approach to both greenhouse design and environmental controls, resulting in the most efficient systems and highest quality product. He has been featured in Marijuana Venture Magazine as one of the “40 under 40” rising stars in the cannabis industry in 2018.

Member Blog: What The Cannabis Market Can Learn From The Energy Sector About Overcoming Market Complexity

by Mike Elliott, Business Development Executive at DCM

In an industry where change is a constant, cannabis companies face big challenges when it comes to brand-building, communications, and bringing products to market. The sector’s complexity is only increasing, which is compounded by its continual evolution, along with tight, varied, fluctuating regulations, and in some cases, less-than-informed consumers.

While the path forward may seem uncharted, in fact, similar market challenges exist in other verticals. With the right strategies and tools, these hurdles—including rigid regulatory conditions—can be overcome. If you’re looking for a roadmap for success, look no further than the U.S. energy sector – specifically, utilities.

The recent shift toward deregulated electric and gas markets has created an environment strikingly similar to that of cannabis. Both sectors grapple with strict, unpredictable regulatory governance. Both must comply with state-by-state variances and prohibitive marketing. And both face the challenge of communicating with customers who are often unfamiliar with the sector’s legislation and production processes.

By gaining an understanding of these obstacles, cannabis operators can improve their own market and regulatory navigation. Following are a few key lessons learned from energy.

Changing regulations demand razor-sharp communications management

For both energy suppliers and cannabis providers, regulation and compliance are determined at the state level. State-by-state laws vary widely and become increasingly complex when factoring in additional local and municipal regulations—not to mention continual review and change. This complexity has a direct impact on communications and brand management. Rules on communication and packaging—including, for cannabis, dosage—can diverge greatly and shift quickly. And there are few signs of this framework getting simpler.

Energy suppliers have addressed this complexity through variable, highly responsive communication platforms that can—very quickly and at scale—accommodate unique market requirements.

For cannabis companies, similar success depends on razor-sharp management, including automation of intensive, often spreadsheet-based processes that are manually maintained and prone to error. Robust, technology-driven platforms can now deliver a wide array of materials efficiently and accurately across different markets, all while ensuring airtight compliance with each market’s specific regulations.

New opportunities call for a fast, location-specific response

Both energy and cannabis businesses must be agile and flexible when responding to new market opportunities. In adapting to fluctuating, state-by-state rules surrounding contract terms and conditions, energy providers have learned the hard way how inefficiency and error can delay market entry and reduce sales potential.

Faced with similar circumstances, cannabis producers need the support of automated, location-specific marketing – technology that efficiently allows for customized, regional messaging across multiple markets and channels while ensuring locked-down branding and regulatory compliance.

Perception is everything when it comes to reaching consumers

With deregulation, utility companies realized that many consumers were uninformed regarding the legislative changes and were unaware of product availability and their own ability to shop around. Educating consumers was key – and communicating to them a value proposition that would distinguish each provider’s offering from that of the competition.

While cannabis is not entirely unfamiliar to many consumers, the dialogue around legalization and products remains similarly dogged by a lack of information and general misunderstanding. Cannabis companies must now shift those perceptions and educate potential customers on product safety and use. Producers must look at developing innovative communications supported by tools like automation, multi-channel communications management, and 1:1 marketing. These can help target, personalize, and monitor communications to better connect with consumers.

With little room to communicate, companies need to get creative

Utility companies are highly restricted in not only how they can make changes to billing and service charges, but also how they can market to consumers. The scenario is the same for cannabis companies, though regulations are even more complex and restrictive, with federal prohibition blocking most traditional means of advertising, including social and digital channels.

Cannabis companies can combat these restrictions with genuinely creative thinking backed by a thorough understanding of the rules. That means combining market knowledge with creative expertise in a way that skillfully complies with regulations without breaking them. At the same time, creativity and customization cannot hinder efficiency. The right tools must be in place to make sure everything works together – for example, a platform that lets users customize branded collateral for different segments and channels, allowing for both efficiency and creativity – consistency and customization.

The bottom line: the stakes are too high for non-compliance

Fines for non-compliance in the energy sector can reach into the millions. Likewise, stiff penalties are levied for non-compliance in the cannabis industry. The financial implications can be devastating for cannabis producers – even more so if it comes to relabeling or pulling product from store shelves. To compound the risk, publicized mishaps can deliver a serious blow to consumer confidence for brands trying to win consumer trust.

With that in mind, navigating the highly regulated cannabis landscape takes careful planning, constant oversight, and the ability to stay ahead of evolving regulatory requirements. While the opportunity is promising, it requires tools, technologies, and strategies that streamline processes, mitigate risk, and increase speed-to-market. Charting your course depends on careful planning, trusted advice, and experienced partners – along with the ability to learn from those who have been there and done that.

Mike Elliott is a Business Development Executive specializing in cannabis at DCM

From brand strategy and consumer insights to dynamic labeling and POS solutions, DCM helps build, protect, and bring to market North America’s largest cannabis brands. Learn more at http://www.datacm.com.