06 Aug 2025

Tariffs and HBS: Q&A with Andy O’Brien

ShareBar

by Shona Simkin

With tariffs back in the daily news headlines, we talked with Andy O’Brien, chief of Operations, about their potential effects on Harvard Business School.

What are examples of how tariffs are affecting HBS Operations?
We buy many things to support the normal day-to-day operation of the School. If you buy a lot of stuff, you're exposing yourself to tariffs. For example, C&W Services, the contractor we partner with to manage housekeeping, purchases cleaning solutions, paper products, and cleaning equipment. With all those products we could see tariff markups depending on where they're sourced, such as paper products from Canada.

We’ve also got some major construction projects underway on campus this summer, with all kinds of different products needed to complete the work. We buy in the US when we can, but the products and materials we use come from all over the world—air handling units, elevators, doors, windows, light fixtures, and so on. We hire a construction manager to supervise the construction and coordinate all the purchasing on the project. They in turn contract with various sub-contractors, vendors, and suppliers for all the goods and services. The tariffs only apply to the goods (materials and products) purchased, not on the services provided.

How are you approaching those expenses?
There was a pause on new tariffs from April 10 until July 10, and then it was extended again to August 1. That was good timing because we were ready to start purchasing for all the summer work, so I told the construction management team to buy everything during the pause. The last I checked we had about 99 percent of the purchases complete for the major work.

Because we have so many different service contracts, I've asked everyone on my team to let us know what products are being tariffed and what the tariff costs are. That means asking the vendors to show us exactly where they're paying the tariff—we don’t want to see a price escalation with a short explanation “additional tariff cost.” Many firms have built up stockpiles during the pause, and if we're buying from their stockpile, we shouldn't be paying a tariff. We’re fine paying an extra amount if they're paying it, but they have to prove what those expenses are.

We’ll also shift where we buy things from. Right now, there are a lot of products outside the United States that are better purchases—we always try to buy at the most reasonable price that we can. For example, steel in the United States is more expensive than in Canada, so it used to be less expensive to buy it in Canada and ship it down. Luckily for us, a lot of stuff can be sourced in the US, so we can avoid tariffs in many cases.

Restaurant Associates manages our food services on campus, so we use their purchasing power through a subsidiary, FoodBuy. FoodBuy purchases more food than Harvard does, so because of their scale it’s to our benefit to do our food purchasing through them.

It’s very hard to budget for tariffs because we don’t know what they are yet, and because different components of purchases are subject to different tariffs.

What are the different types of tariffs, and how are we exposed to them?
This has all been very confusing. There are reciprocal tariffs, which match the tariffs a country puts on our exports. Commodity tariffs are specific to products, such as steel and aluminum from outside of the United States. You’re not supposed to get hit twice. For example, steel from Canada could be tariffed for either commodity or reciprocal. If you buy an American product car with Canadian steel, I am not sure exactly how the tariffs work.

How does HBS use a commodity like steel?
Steel is used not only in construction, but also in utensils for the dining room, a case for a computer, furniture in the office, and chairs in the classrooms. A lot of things may have a little bit of steel, so there are small tariffs on those purchases where foreign steel is used.

Aluminum is another one—it’s in soda cans, door frames, and equipment we use on campus. We buy windows, doors, door hardware, and light fixtures. Even things like a carpet, which you might think wouldn’t be affected, have commodity components from China that could have a tariff. Furniture has all different types of components—wood, plastic, metal, all of which could have tariffs. It’s a lot to unwind and figure out.

How is the University approaching this? Has it been helpful to us at HBS?
It’s been very helpful. The procurement group at the University has helped educate all of us about how to put good guardrails in place when dealing with tariffs. We meet monthly for updates and guidance. They have some large purchasing agreements with different vendors where individual schools can purchase commodities through the University and save money.

For example, Harvard University buys more paper towels than a lot of other organizations, so we benefit from those prices. We can also stockpile items and keep them all in storage at the provider’s warehouse. We’ll pull from that Harvard inventory until it’s gone.

What are some of the biggest challenges?
It’s very complicated because it has been changing so rapidly. We have to stay informed and be prepared to change the way we make purchases. We do a lot of research in different areas to figure out where the products are being made and how we can get a better deal.

It’s been interesting to see all the different dynamics in the negotiations. There are supposedly agreements with the UK, China, and Vietnam, but the details haven’t been shared yet. There are a lot of unknowns. I always expect something crazy to happen.

Scheduling and timing are also difficult. A supply chain ripple can have a major effect on both cost and schedule. For example, if we need to buy 600 wood windows, the contractor will give us a fixed price. Then they have to manufacture the windows, and their wood source now charges 25 percent more. They have some stockpiled wood for a portion of the order, so they shop around to find the rest of the wood that can meet the bid price. But everyone is doing something similar, so the less expensive wood is now getting more expensive. They could wait an extra 60 days for the new stock to come in, but that would delay delivery of the windows. The windows make the building weather-tight so that you can do the interior construction. The end result is a slowdown in the supply chain, which can cause an increase in cost, a decrease in quality, and for sure a lot of uncertainty in the system. We deal with these types of issues quite frequently, but lately it has been at a level of complexity, across such a broad spectrum of supply chains, that is much more than what we have ever experienced.

You’ve been here for 20 years—have you faced this kind of challenge before?
We’ve definitely faced supply chain disruptions before with COVID, and during the great recession there was a lot of volatility in pricing. But with the current environment we seem to have both effects happening at once in an interconnected way. But it is the volatility and uncertainty that makes this current environment more challenging. We still have to accomplish our work—clean buildings, outfit offices, renovate buildings, and serve food—and we like to do that with some consistency in the service levels and understanding of cost. Those goals are now more challenging.

Is there anything else you want the community to know?
Give a lot of love to your operations staff! Seriously, I think it's just important that our community knows we are doing our best to ensure the experience they have on campus is not overly compromised by the challenges and complexities we are dealing with in so many of our service areas. And it’s not just HBS, it's the University as a whole working on and thinking about it all these things too. However, there is some beauty in being part of HBS in that the faculty, staff, and students understand a lot of the intricacies of supply chains and pricing and the way things work—they understand the complexity of a global economy. This is just another challenge that we're facing and we're going to figure out the best way to make our way through it with minimal effect on the community.

Post a Comment

Comments must be on-topic and civil in tone (with no name calling or personal attacks). Any promotional language or urls will be removed immediately. Your comment may be edited for clarity and length.