Federal Reserve Overhaul Oversight Amid Renovation Issues
Federal Reserve Chairman Kevin Warsh has tapped the General Services Administration (GSA) to lead the completion of the central bank’s headquarters renovation. This decision follows an inspector general’s investigation that highlighted significant management and oversight failures.
The investigation revealed that the Fed often strayed from contractual cost controls and permitted significant financial decisions without escalating them to senior leadership, reporting that the project was on track despite continually revised budget and schedule targets.
In response, Warsh has established new executive accountability for the renovation, mandating reviews of both spending and contractor performance, which includes the possibility of recovering payments for services that were not delivered.
“Effective immediately, GSA will act as the Project Executive, reporting directly to the Board of Governors and to myself as its Chairman,” Warsh stated in a letter dated September 29, which accompanied the released report.
The inspector general found no evidence suggesting that federal criminal law had been violated, nor were there any breaches of Board policy that would warrant findings of administrative misconduct. However, the results did uncover considerable deficiencies in the oversight structure that were present during Jerome Powell’s leadership.
Out of the $2.1 billion allocated for construction work through December 2025, approximately 95 percent exceeded the project’s escalation rules and senior input requirements, all while costs surged over $1 billion beyond the initial budget.
Officials responsible for oversight largely relied on the project team’s expertise. Several of them expressed reluctance to micromanage the team, but the investigation indicated that many were not adequately informed about significant developments and decisions.
Despite having several oversight groups, none of the three main internal bodies was clearly tasked with ensuring that the project stayed within budget and on schedule.
Most major cost decisions bypassed the narrow categories that called for escalation, leading to approvals of contracts in the hundreds of millions beyond original estimates without soliciting at least three bids.
The investigation also found that 36 out of 40 budget or schedule assessments falsely portrayed the project as being on track, while budget and schedule benchmarks were revised 13 times, diminishing their value in evaluating performance.
Instead of capping costs and managing spending within those boundaries, the Fed opted to raise the budget as expenditures increased.
Warsh has instructed the Fed to finalize negotiations for a Guaranteed Maximum Price. After four years of construction and more than $2 billion already spent, such protection remains incomplete.
“At this stage, implementing such controls is prudent to ensure responsible use of public funds,” he added.
The Fed will also bring in an independent auditor to assess the accuracy and compliance related to the awarded costs, while staff collaborating with GSA will set fixed budget and schedule metrics.
The investigation called into question how much inflation truly accounted for the cost increases. Two mechanical, electrical, and plumbing packages, for example, skyrocketed from an estimated $178 million in March 2022 to $539 million upon being awarded in 2023, despite construction inflation being around 16 percent during that timeframe.
Many management issues revealed in this investigation paralleled shortcomings found in prior reviews of the Fed’s Martin Building renovation.
Warsh also mentioned that the Fed and GSA would examine contracts to determine the value of services that were paid for but not delivered.
“If necessary, we will pursue reimbursement or project credits for any work that was funded but not completed,” he remarked.
This corrective action comes in the wake of Powell’s assertions that the project was being handled with great care. The inspector general’s findings directly contradict that statement, illustrating a system where crucial spending decisions evaded required senior scrutiny and oversight groups lacked clear responsibility for budget control.
The renovation project became a point of contention in June 2025 when Senate Banking Committee Chairman Tim Scott scrutinized Powell regarding its costs and design. The Trump administration later amplified its examination, with OMB Director Russell Vought questioning Powell’s management approach. Trump himself visited the site with Powell the following month and criticized the financial outlay while urging the Fed to lower interest rates.
Tensions escalated in January 2026 when Powell disclosed that federal prosecutors had issued grand jury subpoenas related to the renovation and his congressional testimony. Powell characterized the probe as an effort to exert influence over monetary policy. A judge later blocked these subpoenas, and the inquiry was put on hold in April after the inspector general’s review began. Following the report’s recent release, Trump renewed his criticism, attributing the overruns to Powell and calling for his resignation.
“This is Jerome Powell’s fault, and he should be forced to resign IMMEDIATELY! If he doesn’t resign, he should be sued, at the highest level, by the United States Government, for either corruption or incompetence, both of which are completely unacceptable,” President Trump expressed on Truth Social.
While Warsh’s letter did not lay personal blame on Powell, it committed to fulfilling all seven recommendations made by the watchdog and to instituting enduring budgeting, performance, and oversight controls to avert similar issues in the future. Some former Fed employees view the OIG report as a significant indictment of Powell’s leadership.
“Truman’s motto was ‘The Buck Stops Here.’ At Powell’s Fed, no one seemed to know where the buck stopped, so it just kept getting passed around,” one ex-staffer commented.
