Document Two
Memorandum
Additional Information: Personal Protective Equipment (PPE) domestic
supply
Date due to MO: 22 May 2020
Action required by:
22 May 2020
Security level:
IN CONFIDENCE
Health Report number: HR20200817
To:
Hon Dr David Clark, Minister of Health
Commercially sensitive
Contact for telephone discussion
Name
Position
Telephone
Keriana Brooking
Deputy Chief Executive
section 9(2)(a)
Kelvin Watson
Manager, Health Supply Chain
section 9(2)(a)
under the Official Information Act
Action for Private Secretaries
N/A
Date dispatched to MO:
Released
link to page 2 link to page 2 link to page 2
Document Two
Additional Information: Personal
Protective Equipment (PPE) domestic
supply
Purpose of report
1.
To respond to your request for additional information regarding Personal Protective
Equipment (PPE) domestic sourcing and procurement
1.
2.
On 18 May 2020, you requested that the Ministry of Health (the Ministry) provide
information regarding:
a) aspects of domestic PPE manufacture: what is being, and wil be manufactured;
production capacity and ability to scale-up production;
b) any constraints on domestic manufacture e.g. supply chain issues with imported
inputs;
c) what proportion of NZ’s PPE needs could be met from domestic production; and
d) employment and other economic benefits expected from domestic production.
3.
While there remain gaps and uncertainties in the data, the report summarises what is
currently known about PPE manufacture in New Zealand, and flags the need for more
investigation in the context of developing a National PPE Procurement Plan.
Background
4.
Since the onset of the Covid-19 pandemic, various agencies have considered the
development of alternative markets and sources, including domestic producers, for the
supply of PPE:
• A draft procurement plan, prepared in col aboration with Ministry of Business
Innovation and Employment (MBIE) in late April 2020
2, proposed a strategic
under the Official Information Act
approach to the management of al PPE procurement and supply (the Plan was
subsequently reduced in scope to only consider N95 mask procurement
3). This
Plan noted that given the supply-chain chal enges regarding P2/N95 masks in
particular; securing a domestic supply was seen as a critical response enabler.
• section 9(2)(b)(ii)
Released
1
HR20200704 - MEMO: Personal Protective Equipment (PPE) distribution across the health sector
2
PPE Procurement Plan DRAFT, 20 April 2020, MoH & MBIE, drafted by Tom O’Sul ivan
3
20200419 P2-N95 Masks Procurement Plan DRAFT 19th April.docx
4
section 9(2)(b)(ii)
Health Report: H20200817
2
Document Two
section 9(2)(b)(ii)
• The National Crisis Management Centre compiled a business register which
included a ‘stocktake’ of local manufacturers that currently manufacture PPE in New
Zealand. The stocktake identified potential suppliers but did not obtain information
about the specifics of production capacity and capability, or ability to retool or
scale-up production at speed. In addition, it did not consider whether the products
could be produced to the required clinical standards (where these apply).
• section 9(2)(b)(ii)
ation Act
5.
The Ministry’s focus over March-April was on the acute needs to source N95 masks,
noting that domestic manufacture would take time to scale. This meant that the
Revolution Fibres proposal, Lanaco opportunity and the Procurement Plan were not
progressed at that time. However, the production quality of the Lanaco masks is
currently being evaluated by HealthSource NZ. This involves “fit” testing with users to
ensure that the stock meets workforce needs and quality assurance requirements
against known international standards.
6.
While some domestic production and manufacture opportunities have been scoped
and/or initiated, there is a need to develop a medium to long term policy and strategy
for a sustainable approach to the supply and procurement of PPE. NZ Health
Partnerships (NZHP) has now been tasked with further development of the national PPE
procurement plan, under the Ministry’s direction, to more broadly consider all PPE
requirements. This plan will provide the diverse and resilient sourcing strategy which
considers the appropriate contribution of domestic production in the context of
ongoing disruptions to international supply.
under the Official Inf
Summary of domestic PPE Supply
Domestic suppliers
7.
Currently, we are aware of a relatively smal number of NZ manufacturers making the
following products at scale (refer Table 1).
Released
5
section 9(2)(b)(ii)
Health Report: H20200817
3
link to page 4 link to page 4 link to page 4
Document Two
8.
Domestic PPE production continues to operate in a competitive international pricing
market. Prices reflect this competition as well as the increased cost of sourcing raw
materials internationally.
Table 1: Key items of PPE required and what is available domestical y
Reliance on
import of raw
PPE item
section
Production capacity (est.)
section 9(2)(b)(ii)
material
Face
9(2)(b)(ii)
section
Enough domestic manufacture to
Plastics
shields
9(2)(b)(ii)
cover NZ demand.
Also, Face Shields can be
reprocessed (fol owing WHO
guidance on PPE conservation and
reuse
6)
section 9(2)(b)(ii)
se
Up to 10,000 per DayFace Shield
Plastics
cti
n Act
(based on TIDI design) with frame.
CCDHB and Waikato DHB are
on
currently purchasing from this
9(
supplier.
2)
section
30,000 units/week, some of which
Plastics
(b
are supplied to DHBs
9(2)(b)
Masks –
)(ii)
se
Approx. up to 500,000 per week of
Reliant on
General
cti
large masks
Spun bond
(ii)
purpose
Propylene
o
Product
n
(SBPP)
9(
currently
sourced from
2)
N95
se
Unknown production capacity
South Africa;
Masks
(b
previously
cti
)
Taiwan, India
o
and China
(ii)
n
9(
2)
(b
secti
Unknown production capacity
)on
Hand
(ii)
9(2)
section 9(2)
Unknown production capacity
Isopropyl
Sanitiser
(b)(ii)
This product has been approved
Alcohol,
(b)
for use by the Infection Control
Glycerine
(ii)
team.
sectio
section 9(2)(b)(ii)
section
n 9(2)
er the Off
Isopropyl
Alcohol,
9(2)(b)(ii)
Glycerine
(b)(ii)
un
9.
Beyond these manufacturers, there is not extensive detail available on the scale within
the NZ domestic manufacturing industry to produce PPE, the potential to retool or
scale up production to meet domestic PPE needs, the specifics of production capability,
or the likelihood of meeting clinical standards. As noted above, the National Crisis
Management Centre business register included a ‘stocktake’ of local manufacturers that
currently manufacture and/or distribute PPE in New Zealand, which produced around
150 entries. Further to this, Manufacturing New Zealand has created an online register
for New Zealand businesses able to produce PPE
7. It currently contains 329 entries but
Released
includes both manufacturers and importers/distributors reliant on imported supply.
NZTE has created an online marketplace identifying suppliers of publicly-available PPE
8.
10.
Issues relating to domestic production include:
6
https://apps.who.int/iris/bitstream/handle/10665/331695/WHO-2019-nCov-IPC_PPE_use-2020.3-eng.pdf
7
https://nzmanufacturer.co.nz/2020/04/covid-19-ppe-register-goes-live/
8
https://nz-marketplace.nzte.govt.nz/s?q=
Health Report: H20200817
4
link to page 5
Document Two
•
Ability to scale production: During the peak of Covid-19 period, OCC forecast
about 1 million N95 masks were required per week. Currently, the consumption rate
is around 100,000 N95 masks per week.
•
Assurance of ongoing demand: Some companies that can scale-up or reconfigure
production to manufacture PPE may be reluctant to do so in the absence of
assurances of ongoing orders. Manufacturers will require some return on
investment for scaling-up their production and may also seek long-term purchase
guarantees if they are converting current production environments to a new
product line, or retraining staff.
•
Sourcing raw or intermediate input materials: Logistics disruptions and trade
restriction in global markets have impacted on NZ producers. For example, Spun
Bond Polypropylene (SBPP), a material used in the manufacture of filters, facemask
filter media, and other PPE (notably gowns) is in short supply global y given high
demand in some markets (China) and export restrictions in others (India). Domestic
production of specialised theatre linen is reliant on the importation of the
specialised linen. Some mask producers have advised of issues with importing
component parts (e.g. nose pieces, filters). Addressing some of these shortages wil
involve identifying alternative supply markets or retooling existing manufacturing.
11.
Before progressing this option or any other option to support domestic production
through targeted procurement, a broader market scan would need to be completed to
ascertain other market competitors, evaluate proprietorial interests and provide a
competitive process before commissioning production of this product to support mask
manufacture.
12.
It is possible to enter into a non-exclusive contract to produce PPE. This is a direct
source process permissible under Rule 14.9(a) of the Government Procurement Rules
(4th Ed. 2019) which states a procurement opportunity does not need to be openly
advertised in a genuine emergency as defined by MBIE’s Quick Guide to Emergency
Procurement. This guide defines an emergency to include a critical health emergency
such as a pandemic. Further to this, Rule 14.9(j) states, an opportunity does not need
to be openly advertised if an agency receives an unsolicited unique proposal, as
described in MBIE’s Guide to Unsolicited Unique Proposals.
under the Official Information Act
13.
We have received many offers for domestic consideration to address the supply of PPE
within the domestic market. On review of these offers we have in some cases identified
the sourcing of sub-medical grade products from offshore that do not meet the
certification or grade specification requirements for use of PPE within New Zealand.
Economic opportunity for domestic supply
14.
The last significant analysis of the New Zealand manufacturing sector (MBIE, 2018)
9
indicated that the sector overal made up 12% of New Zealand’s economy ($23 billion),
Released
directly employs more than 240,000 people (close to 11% of total employment) and
accounted for over half of our total exports.
15.
It is chal enging to estimate the percentage of total manufacturing employment and
economic activity attributable to manufacturers of PPE, as these manufacturers
9
MBIE Manufacturing Sector Report 2018 https://www.mbie.govt.nz/assets/f0f81b6194/new-zealand-manufacturing-
sector-report-2018.pdf
Health Report: H20200817
5
link to page 6
Document Two
represent a proportion of the total output of different manufacturing subsectors
(plastics and rubber, and other manufacturing (including textiles). At the time of the
MBIE analysis, 12,000 people were employed in the manufacture of polymer products,
basic polymers and natural rubber products, and 7,900 people employed in the
manufacture of textiles, fibre, yarn, woven and knitted products, clothing and footwear.
16.
New Zealand has relied heavily on global interconnected supply chains to improve
margins. Our supply chain vulnerabilities include realities inherent to medical supply,
such as high levels of cyclicality or long lead times, level of inventory to maintain and
approaches to domestic product development. These pressures have been
exacerbated by pandemic conditions placing unprecedented commercial pressure on a
small number of commonly-sought items, and on air and sea logistics, together with an
increase in trade restrictions affecting both PPE items and raw materials for producing
them.
17.
Concerns continue to emerge regarding overseas sourced PPE from new
manufacturers, including quality concerns, potential for fraudulent activity, ongoing
reliability of international supply chains, and increasing trade restrictions. As global
demand increases further, and the number of new manufacturers grow, these problems
are expected to compound.
18.
In considering appropriate response strategies and the role of domestic production in
them, it is worth considering a recent OECD analysis of supply chain issues for face
mask global value chains. This analysis concluded that it would be excessively costly for
every country to develop production capacity that matches crisis demand and
encompasses the whole value chain. The report suggests that an alternative, more
effective and cost-efficient solution in the long-term may involve the combination of
strategic stocks; upstream agreements with companies for rapid conversion of
assembly lines during crises (with possible government incentives and co-ordination);
and supportive international trade measures.
10
19.
The findings of this study are relevant for the New Zealand context and for PPE items
beyond masks. They imply that while developing some domestic capacity and
capability may be worth exploring, this may not be cost-effective or efficient for al
items and should be part of a broader and considered suite of measures aimed at
under the Official Information Act
achieving diverse and resilient supply networks.
20.
Domestic PPE production could provide some opportunities for ongoing and additional
education and employment. Cross-agency initiatives such as the Provincial Growth
Fund, the Employment Strategy, Future of Work and the Review of Vocational Education
could help grow a talent management pipeline (industry skil s growth and opportunity
to upskil and reskil people adversely effected by economic recession) alongside a
supply pipeline for PPE. Aligning these strategies to a growth and productivity area
could al ow New Zealand to become a global y competitive supplier of PPE.
Released
21.
Our primary industry opportunities alongside Crown Research funding could support
the identification of alternative raw materials that are ecological y sustainable and
economically sustainable. International partners may also be willing to pay for the
development of capacity within New Zealand to secure quality products with minimal
10
http://www.oecd.org/coronavirus/policy-responses/the-face-mask-global-value-chain-in-the-covid-19-outbreak-
evidence-and-policy-lessons-a4df866d/
Health Report: H20200817
6
link to page 7
Document Two
supply chain risk using higher content of local y produced materials. This is a viable
option for the production and export of face shields however, it may not be viable for
other PPE items where raw material supply is difficult to source, domestic product is
expensive, or it is unviable to develop domestical y.
22.
Any future support to the development of domestic PPE production could be targeted
to those items in most pressing need in the New Zealand context: N95s, L2 Procedure
masks and L3 Procedure masks. It is possible that, subject to appropriate due diligence,
suppliers could be contracted to supply lower-specification items (e.g. L3 procedure
masks) to confirm proof of concept and quality, before investment is considered in
more complex manufacturing.
23.
Another option is to consider increasing the domestic production capacity around the
key raw materials or intermediate products e.g. SBPP, Isopropyl Alcohol, Glycerine
11, or
increase reserves of these raw materials in New Zealand, to enable a wider range of PPE
to be produced domestical y.
Summary and next steps
24.
The New Zealand health system currently has orders in place to ensure sufficient supply
of key PPE items. Based on current level of usage, there is sufficient N95 masks,
procedure mask, face shields and goggles on hand and placed orders to last more than
four months. Gowns, Aprons and Nitrile Gloves continue to be in high demand and
further orders wil be required to ensure that there is at least supplies for the next four
months.
25.
It is evident, given the long-term requirement for PPE to manage Covid-19, a strategy is
required to map supply options across both domestic and international markets. This
work is currently being overseen by the Ministry, working with NZ Health Partnerships.
26.
Robust future demand forecasting remains a chal enge. The Ministry is working to
create a reliable forecast that can be used to inform current procurement and the
future strategy.
27.
MBIE can assist with the development of commercial arrangements, consideration of
patent requirements and provide advice on the economic-legal aspects of market
under the Official Information Act
policy.
Work underway
28.
The Ministry is working to:
a) progress development of a national PPE procurement plan to more broadly
consider al PPE requirements
Released
b) develop better forecasting of future PPE demand
c) test and revalidate assumptions about domestic PPE production capacity and
capability
11
Glycerine (also cal ed Glycerol or Glycerin) is a simple polyol compound.
Health Report: H20200817
7
Document Two
d) understand the upstream constraints for domestic manufacture such as investment
requirements and raw material supply.
29.
In paral el, the Ministry continues to work with DHB procurement partners to secure
sufficient stock of PPE internationally, noting that this continues to be chal enging due
to global demand.
Next steps
30.
The Ministry wil report back to you about the outcomes of supply chain work outlined
in paras 28 and 29 in July 2020.
31.
Officials can provide further information about this topic at your request.
Dr Ashley Bloomfield
Director-General, Ministry of Health
under the Official Information Act
Released
Health Report: H20200817
8
Document Outline
