WASHINGTON — September 30, 2026: The Federal Reserve’s inspector general found no reasonable grounds to believe a federal crime occurred and no administrative misconduct in the central bank’s headquarters-renovation project, while documenting extensive failures in cost control, contracting and oversight.
The approved budget for renovating the Marriner S. Eccles and 1951 Constitution Avenue buildings increased from $1.317 billion in February 2020 to $2.381 billion in December 2024. Within that total, the construction budget more than doubled from $921 million to $2.018 billion.
The project’s construction manager proposed a $2.135 billion construction cost in January 2026. The inspector general’s report distinguishes that proposal from the Board of Governors’ most recently approved budget.
No criminal referral or misconduct finding
The Office of Inspector General began its evaluation in July 2025 at the request of then-Chair Jerome Powell. A separate Justice Department criminal inquiry involving Powell’s June 2025 congressional testimony was closed in April 2026 while the inspector general’s work continued.
The inspector general said it did not find reasonable grounds to believe a violation of federal criminal law had occurred and did not identify violations of Federal Reserve policy that warranted an administrative-misconduct finding.
That conclusion does not amount to an endorsement of the project’s management. The report contains detailed criticism and seven corrective recommendations.
What the report found went wrong
The Federal Reserve chose a “construction manager at risk” contract model, which is intended to establish a guaranteed maximum price and shift defined cost and schedule risks to the construction manager. The inspector general concluded that the Board did not effectively execute that model.
Among the report’s findings:
- The solicitation did not require bidders to provide an estimated cost for the full construction work.
- The construction manager was not asked for a detailed project estimate until December 2025, after more than $2 billion in construction packages had already been awarded.
- The Board had not negotiated a project-level guaranteed maximum price as of July 2026.
- The project proceeded without a firm cost ceiling that transferred material risk to the contractor.
- Design delays and changes prolonged exposure to inflation and added redesign costs.
- The work was divided into 84 smaller price packages, which the report said may have reduced competition and economies of scale.
- Project dashboards said the work was “on track” without fixed budget and schedule reference points.
Inflation contributed, but did not explain everything
The report recognized inflation, construction-industry demand, excavation challenges and unforeseen site conditions as real cost drivers. The site’s high water table and soil conditions complicated underground work.
However, the inspector general found that several major cost categories increased far faster than relevant construction-price measures. Seven categories accounting for $799 million of the total increase rose between 88% and 588%, compared with a 24% increase in the relevant producer-price index from March 2022 through January 2026.
The report therefore concluded that inflation was a contributor, not a complete explanation.
Disputed design features were not the main cause
The inspector general reviewed water features, restored marble, a garden terrace, vegetated roofs, glass atria and skylights. It concluded those features did not materially drive the later construction-cost increases.
That finding addresses a prominent political dispute surrounding the renovation. It does not mean the features were free: the report lists costs for several components, including $3.4 million for water features in the construction manager’s proposal and $27.6 million for skylight work.
Seven recommendations and the Fed’s response
The recommendations include negotiating a guaranteed maximum price or otherwise securing best value, setting project cost and schedule success metrics, establishing the construction manager’s fee, strengthening governance and accountability, auditing awarded costs, reconciling paid services against contract requirements, and creating a standardized framework for future major projects.
The Federal Reserve chairman concurred with the findings and recommendations, according to the report. The inspector general said it would follow up quarterly.
For more central-bank and economic-policy reporting, visit Economy and Finance News. Read AskNovus’ September 30 U.S. market-close report.
Sources
- Federal Reserve and CFPB Office of Inspector General, September 2026: full evaluation report
- Fox Business, September 30, 2026: report summary and response
Featured image: Tomas Martinez/Unsplash. Illustrative photograph of government-building renovation.