National Security and Domestic Vaccine Supply: Lessons from the Munitions Supply Program

By Charles Davies, Fellow with the CDA Institute

The COVID-19 pandemic has again shown that the concept of national security has broad sweep and needs far more attention from Canadian governments. The neutering of the Global Public Health Intelligence Network only months before the emergence of the virus; the fact that pandemic preparedness was allowed to atrophy despite the recent experience with SARS and other diseases; our dependence on an unreliable and malevolent supply chain partner in China; and the panicked scramble to source COVID-19 vaccines all point to prolonged neglect of national security planning and preparedness by successive governments. There is much to consider in looking to remedy these and other deficiencies, but the focus of this commentary is the issue of vaccine supply.

The government has responded to the crisis by purchasing vaccines from as many international suppliers as possible, contracting for far more than needed as a hedge against development and production delays. While there has been some political turbulence from disruptions to early deliveries, this strategy may yet prove successful – at least this time. However, the pandemic threat will not disappear after COVID-19 and it is therefore appropriate that a public debate is underway about whether Canada should establish a national capability to develop and produce its own vaccines in quantity. Useful insights into such an initiative can be gained from a comparison with an existing government-industry arrangement for assuring domestic supply of key commodities: the Munitions Supply Program (MSP).

The MSP was established in 1978 and recently underwent a comprehensive government review. Its policy objectives are to:

• Contribute to national security and defence by providing an assured domestic source of supply for critical high-volume-usage ammunition and small arms weapons for the Canadian Armed Forces (CAF) in both peace and war; and
• Contribute to economic growth by maintaining and developing technologies and industrial capabilities that are globally competitive and sustain good jobs.

In pursuing these objectives, a balance has been sought between sometimes higher costs of production in Canada and the benefits of increased surety of supply (including a surge capacity), industrial development, and export success.
The business environment of the MSP is challenging. Its only customers are governments, the specialized production capabilities are very high-cost, and normal CAF demand is limited. However, there have been times – most recently during the war in Afghanistan – when CAF ammunition consumption increased substantially. Urgent sourcing of additional supplies internationally was especially difficult during this period as demand from mission partners was equally high and producers were concentrating on meeting their own national requirements. The MSP companies made a critical contribution to keeping the CAF in the fight by increasing production of key items up to 500% while halving delivery lead times, according to an independent 2015 study. This was a remarkable achievement as the agreement with the government stipulated a surge capacity of only 100%.

In terms of economic impact, independent analysis has shown that government spending on MSP products and services has provided a net positive benefit to the Canadian economy. For example, the approximately $200M in government payments to the MSP companies in 2016 translated into nearly $865M in net positive economic impact and sustained over 5,300 mostly good quality middle-class skilled technical jobs and high-value technology positions.

So what does all this suggest about a Canadian vaccine supply program? First, establishing policy objectives similar to those of the MSP would make sense. Both surety of supply and economic benefits need to be sought in balance – the former for obvious reasons and the latter to make the necessary ongoing investments palatable for future decision-makers and taxpayers after the present pandemic becomes a distant memory.

Second, like munitions, vaccine demand will periodically spike without much warning so a robust surge capability is essential. However, it need not resemble the MSP model since vaccine production infrastructure is much less costly than that of munitions and can also be more multi-purpose. Further, there are more players in the domestic marketplace. This means there are more options for achieving the required outcomes.

Third, while some are calling for a government-owned capability, the MSP shows that a private sector solution can work. MSP product quality is high, and cost controls and production efficiency are globally competitive against similar production scales. The former government-owned entity was never able to attain comparable standards.

Finally, the politics of a vaccine supply program may be more difficult. The cost of the specialized facilities and uniquely skilled workforces in the munitions industry represents a prohibitive barrier to entry by new players into the limited marketplace. Consequently, there is little political cost to maintaining long-term preferred supplier relationships. Vaccines are different. There is a diverse domestic marketplace and investment costs for new products and facilities are more manageable, so an assured supply program will need to be structured differently. Extensive consultations with the industry will be needed to develop a politically sustainable model.

To conclude, the MSP can offer useful insights in the discussion about a domestic assured source of supply for vaccines. The parallels are by no means exact, but even the differences point to relevant factors that need to be considered. However, assuring supply of a particular commodity is not by itself a complete solution. Similar to any other national security threat, pandemic disease readiness requires a comprehensive strategy encompassing: strategic early warning; effective defence; resiliency in the face of attacks; countermeasures, in this case effective treatments and the ability to rapidly defeat diseases; post-pandemic recovery; and more. An assured domestic vaccine supply may be an important element of such a strategy, but will not by itself defend Canada against pandemic disease.

CDA Institute Research Fellow Colonel Charles Davies (Retired) is a former CAF Ammunition Technical Officer who, among other senior appointments, served as the DND explosives regulator and as strategic planning director for the department’s Materiel Group.

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