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Not legal advice. Methodology and industry baselines only. Counsel must verify licensing before category change.

Cost Framework — Facility Conversion TCC

Authority: 01-RFP-RESPONSE.md Section 3
Inputs: 09-FACILITY-QUESTIONNAIRE.md, 02-EQUIPMENT-GAP-MATRIX.md

Estimates are order-of-magnitude industry baselines — not quotes. Mark TBD until discovery complete.

1. Complexity rating

Profile Score Rationale
Flour-only → kratom powder (Scenario A) 7 / 10 ~60–70% unit-op overlap; kill step + dust + QMS are net-new
Extraction-only lab → powder (Scenario A) 8 / 10 Milling + kill step + packaging; extraction CapEx stranded or segregated
Hybrid flour + extraction → powder 7.5 / 10 Best reuse story; still needs kill step validation
Scenario B concurrent ops +1.0 Segregation CapEx, dual audit OpEx, highest compliance failure mode

Factor breakdown

Factor Weight Rating (1–5) Driver
Equipment reuse 25% 3 Mills/pack reuse; kill step often new
HVAC / dust 20% 4–5 Finer dust; NFPA 652; HEPA upgrades
Microbial / kill step 25% 5 Category Salmonella history; import fail rates
Regulatory / licensing 15% 3–4 State KCPA; category change counsel
Validation / QMS 15% 3 3–5 pilot lots; AKA GMP audit prep

2. Major cost drivers

# Driver Low Base High Notes
1 Kill-step equipment + validation $75k $175k $400k+ Steam tunnel vs batch oven vs irradiation contract
2 HVAC / dust upgrades $50k $120k $250k Dedicated AHU, HEPA, explosion venting
3 Milling / sifting (net-new) $40k $90k $200k If extraction-only facility
4 Segregation build-out (Scenario B) $100k $250k $500k Walls, airlocks, separate gowning
5 QMS / SOP build $40k $75k $120k 111-aligned; consultant + internal time
6 LIMS / batch software $15k $40k $80k Replace or parallel METRC
7 Lab testing (OpEx per lot) $400 $650 $900 Micro + alkaloid + metals per batch
8 AKA GMP audit (annual) $8k $15k $25k Third-party auditor
9 Licensing / counsel $10k $35k $75k Category change, state registration
10 Decontamination (Scenario A) $15k $30k $60k THC clearance, waste manifest
11 Downtime revenue gap (Scenario A) Variable Variable Variable months × monthly_fixed_cost

3. Total cost of conversion (TCC) formula

TCC = CapEx_reuse_retrofit
    + CapEx_net_new
    + validation_and_IQ_OQ_PQ
    + QMS_SOP_build
    + licensing_and_counsel
    + (downtime_months × monthly_fixed_cost)     [Scenario A only]
    + segregation_premium                         [Scenario B only]
    − equipment_salvage_or_resale

4. Scenario worksheets

Scenario A — Hard changeover (base case)

Line item Low Base High
Kill step + validation $75k $175k $400k
Dust / HVAC $50k $120k $250k
Milling (if net-new) $0 $90k $200k
QMS + LIMS $55k $115k $200k
Decon + licensing $25k $65k $135k
CapEx subtotal $205k $565k $1.19M
Downtime (3 mo @ $50k/mo fixed) $150k $150k $150k
TCC (incl. 3 mo downtime) $355k $715k $1.34M

Assumes flour line exists with reusable mills. Extraction-only adds $90k–$200k milling line to base.

Scenario B — Phased simultaneous (6-month bridge)

Line item Increment vs A
Segregation build-out +$100k–$500k
Duplicate mill or validated cleanout program +$40k–$150k
Dual QMS / audit OpEx (6 mo) +$30k–$60k
Premium over A +30–50% CapEx

5. OpEx model (steady state)

Item Per batch (500 kg lot example) Annual (100 lots)
Third-party testing $500–$900 $50k–$90k
Kill-step utilities $50–$150 $5k–$15k
Labor (incremental QA) — $40k–$80k
AKA GMP audit (amortized) — $8k–$25k

6. Calculation procedure (project team)

  1. Discovery — complete 09-FACILITY-QUESTIONNAIRE.md
  2. Classify current state — flour / extraction / hybrid (02-EQUIPMENT-GAP-MATRIX.md)
  3. Define inbound mix — raw leaf vs pre-milled (%)
  4. Score reuse — item-by-item reuse / retrofit / net-new
  5. Select scenario — A vs B (05 / 06)
  6. Build BOE — low / base / high with explicit assumptions
  7. Gate — no PO >$25k without compliance checkpoint (07-PM-AND-DISCOVERY-SOP.md)

7. Items requiring discovery (TBD)

  • [ ] Existing kill-step capability
  • [ ] Dust collector CFM vs target throughput
  • [ ] Monthly fixed cost (for downtime calc)
  • [ ] Salvage value of cannabis-specific equipment
  • [ ] State licensing fees (jurisdiction-specific)
  • [ ] Inbound material mix and volume commitments