To: Shannon Andrews Chief Procurement Officer City of Chicago From: Allison Arwady, MD Commissioner ?2 i Department of Public Health (CDPH) Date: April 17, 2020 Re: Emergency Procurement of Nitrile Gloves from The Howard Elliott Collection Chicago has done a good job of building safety stock of PPE (Personal Protection Equipment) over the years, but some of these stocks are projected to run low/out in the coming weeks. It is challenging to predict a specific day products may go out of stock, given that hospitals are attempting to procure items themselves (and we only have partial visibility to this), we?re taking in donations, and we're also sending kits of supplies to hospitals who request them. Further, it?s unclear what items and in what quantities (it any) the city will receive from the federal government. The City has done its best effort to assess projected burn rates, of core PPE items which will accelerate significantly (and in a challenging to predict amount) with the building of an alternative health care facility in the convention center this month. With regard to Nitriie Gloves, we currently have 3M gloves in inventory as of April 16, and it?s unclear how many more we may receive from donations/federai government. Eight days ago, the City?s nitril'e gloves stocks were Just over 5M so we?ve seen an accelerated burn rate. The fire department alone is forecasting the upcoming month?s burn rate to potentially be above 3M gloves so we must act quickly to replenish reserves. There is extremely limited inventory of PPE available today from traditional suppliers/ channels, due to global shocks to demand caused by the pandemic. We have reached out to traditional suppliers (who only have the manufacturing capacity to produce a fraction of the world?s demand right now) and their inventories are depleted. Further, there is extremely limited domestic production of PPE and certainly not enough to meet the new demand for these goods. We have explored dozens of potential local/regional solutions, but we have yet to find a single source that can produce our needed volume in the US: and in short order. Coldchain (our supply chain and procurement partner) communicated with our traditional suppliers (McKesson, Henry Schein) and came back to us with, ?They both said that they do not have these quantities in the supply chain and that any quantities are two plus weeks out on 1 I 9:7: anything other than small quantities. doth recommended that if the City had a source that can supply to act on that opportunity." We later learned that the federal government is going to be centrally managing a significant portion (about half} of PPE these traditional suppliers are bringing into the country and helping to determine the allocation of where critically needed WE goes. This increases the uncertainty of knowing what/when/if the City of Chicago will receive these items. Given the announcement of the FEMA ?Operation Airbridge? proiect, they take 60% of all PPE inbounding to the US through MoKesson for their distribution scheduling and the remainder goes into the normal supply chain. Chicago put a large block hold into Evchesson to ensure we have first pick of materials that come down the pipe, since we already have an active contract with them for PPE purchasing. One week ago Coidchain and advised us that still none of our orders with traditional suppliers have been fulfiileci and we only have been given indication by McKesson yesterday that we will be receiving a very smaii quantity {less than 10% of one, small order) of Nitrile Gloves. But a delivery date isn?t even confirmed yet. Meanwhile, seeing this rapid growth in market demand in the last few weeks, China has ramped up hundreds of factories and converted many of their lines to produce PPE. So there is a large and growing network of PPE suppliers/ agents that did not exist 4-6 weeks ago. Given the lack of domestic availability, the City of Chicago aggressively researched alternative supply capabilities. Over the last two weeks, multiple employees of the City of Chicago and namely Joe Schuster - vetted dozens of potential suppliers (domestic and otherwise). We engaged in several phone calls/ email exchanges to learn about local manufacturing capabilities, price quotes; shipping, product availability, Chinese manufacturing validity, customs challenges, etc. Several examples include: Midwest Sourcing LL-C. Votanlk LLC SHIFT Medical, The Howard Elliott Coliection Meitus Energy Services 0 Optimal Design Co? 0 Wanxiang America Corporation a Nebula Group USA 0 This analysis confirmed that The Howard Elliott Collection?s pricing, terms, manufacturing relationships, and ability to deliver quality-controiled product in the quantities we need were either at, or far above, current industry average amongst these vetted companies. The City of Chicago learned about The Howard Elliott Collection through Senator Dick Durbin?s team specifically, Greg Bales. The Howard Elliott Collection is traditionally a 2 I 19231-52"; furniture/hardgoods manufacturer, based in Chicago and with an on-the?ground presence in factories in China, The company is in good standing and has operated for the last 20 yea rs. Knowing the crisis and need for PPE coming to Chicago, company President, Brian Berk, the company?s China resources to identify new manufacturing. The Howard Eiliott Coiiection was first prioritized as a supplier to more deeply yet and expiore a relationship with due to their: 1) Physical on~the?grounci presence in China (versus going through a sourcing agent) 2) Direct access to many high~voiu me factories in China that just recently began PPE production 3) to meet our high volumes 4) Strong personai references 5) Positive business reputation in the local community for the last 20 years The City of Chicago partnered with Mayer Brown, who leveraged both their Chicago~baseci and overseas teams to assess the credentials of The Howard Eiliott Coliection. The Corporation Fiie Detail Report shows the organization in good standing, and further research shows the President, Brian Berk, is in good standing and with no record of disciplinary action since his initial law licensure in 1995. We also acquired the company?s banking infra/history and contacted the bank directly to ensure the company is in good standing financialiy bank confirmed this information. With this vetting completed, the City of Chicago ordered 300K units of Face Shields and 1M Protective Masks in early April. The transaction was seamiess, and product began arriving in the Chicago facility today ?with quantities and quaiities being confirmed upon arriyai. Given the successful first order that has been placed with The Howard Eiliott Coliection, the City has gained confidence in their trustworthiness as a supply? which is increoibly important during this time when there is signi?cant PPE fraud. The suppiier again leveraged their global network to identify a substantiai quantity of nitrile gloves, from a trusted supply source in China, that has recently iandeo in Los Angeies. After speaking with the owner of the gloves (whom Brian Berk, of the Howard Elliott Coliection has a personal relationship with), he agreed to allocate 1M units for purchase by the City of Chicago. They are offering a very competitive price, and this is also a LANDED price in Chicago so international freight is not going to be a subsequent charge. These are exceptionaiiy attractive terms when compared to other suppliers. 1) These global suppiiers hold superior (and increasing by the day) negotiating ieverage, as they literally have countries competing against one another for access to these finite PPE resources. Every single supplier offering buik PPE to The City of Chicago that we?ve spoken with requires either 50% or 100% money down to place an order - and the percentage has been shifting 3 I Panto .v ..: more and more to 100% down with each passing day. For example, The Howard Elliott Collection?s manufacturing partner who produced Face Shields and Protective Masks for .us 2 weeks ago (who then allowed the City to put 50% down) is now requiring 100% down for any orders from any parties. This is simply the new world of terms we live it. Brian Berk, President of The Howard Elliott Collection, and expert on international sourcing, elaborates on the current manufacturing environment: ?These are extraordinary times and there are no "set" rules of commerce. 0 Given the worldwide demand for PPE items, the Chinese manufacturers are very selective as to who they are going to work with and are dictating terms of how they are going to work with potentioi customers. . Nations are placing orders with thesefoctories. a Most supplier terms of their pro-forma invoice are 100% payment with placement of the order.? Brien Berk?s prediction on the increasingly competitive market on PPE has come to fruition in recent weeks, as PPE and freight prices have steadily climbed. Nitrile Gloves, along with N95 masks and isolation gowns, has become the next scarce resource where supply cannot keep up with growing demand. With each day we delay, the price risks increasing, and the duration between order placement and product arrivei increases. We are continuing to evaluate the potential of current vendors (eg. McKesson, iiemy Schein), but there have been zero indications tie?date that they can produce or supply even a fraction of Chicago?s high demand for these products. Given this uncertainty, we have a ?duciary responsibility to procu re the potentially lifesaving PPE that is available now to protect first responders and health workers in Chicago. 4 my: