Fed inspector general traces $2.5 billion renovation's cost surge to weak project management

The summary a board would want from Horowitz's 120-page report is short: the Fed broke no law, its officials committed no misconduct, and inflation drove the bill. The first two points hold up. The report found no "reasonable grounds to believe that a violation of federal criminal law had occurred" ^[3], and Horowitz wrote, "we did not identify administrative misconduct during our evaluation" ^[4]. The third point holds up less well. Fed officials repeatedly told the inspector general that inflation was the chief driver of cost increases. The report agreed that "inflation was clearly a factor" but found the overruns outpaced the rate of inflation ^[9].

The failures the report does name sit at the start of the job. The Fed did not obtain a construction cost estimate from its general contractor, and it did not share a stated cost limit with the contractor at the outset ^[7]. Internal governance was "insufficient" for a project of this size, the report said ^[8]. Horowitz traced the cost surge to four areas and issued seven recommendations ^[6]. I think that sequencing matters more than any price index. A contractor with no stated ceiling has no number to design toward, and an owner with no estimate has no baseline for judging each increase. CBS reports that the office found poor management dramatically increased the cost ^[1], without giving a dollar figure for the overrun.

The Board's best defence came from two of its senior economists. They agreed that the Producer Price Index "is a good measure of general changes in new office construction costs" but noted that using it "to evaluate cost increases for any specific project can be misleading" ^[11]. The point is sound, and it weakens the Board's own position. If a general index misleads, the remedy is an analysis of this project. The inspector general asked the Board for an assessment of how inflation affected the renovation, and the Board did not provide analysis explaining it ^[10].

The political fight ran on other questions. The inspector general did not find fault with features the White House had described as "ostentatious" and not compliant with the approved plans ^[12]. Bill Pulte, who leads the Federal Housing Finance Agency, urged Congress in July 2025 to investigate Powell over his testimony, alleging he had been "deceptive," and offered no evidence ^[15]. Grand jury subpoenas later threatened an indictment related to Powell's June 2025 testimony before the Banking Committee ^[14]. The federal district court in Washington quashed the subpoenas, issued by U.S. Attorney Jeanine Pirro, finding they were a pretext to pressure Powell into voting for lower rates or resigning ^[16]. Horowitz's review, which began in July 2025 at Powell's request, covered the same testimony and found no criminal wrongdoing ^{[13] [17]}.

The criminal side is closed for the moment. Pirro ended her investigation in April ^[18], saying she was "confident the outcome will assist in resolving, once and for all, the questions that led this office to issue subpoenas" ^[19]. On Wednesday she told CBS she would review the report, and CBS has asked her office whether she plans to reopen the case ^[20].

Kevin Warsh, whom Trump nominated in January to succeed Powell ^[22], acted a day before the findings were public ^[1]. He had received a copy of the report and wrote to Horowitz on Tuesday that the General Services Administration would now oversee the project ^[21]. Moving the project to the GSA is this quarter's decision. Next quarter's consequence depends on whether the new overseer supplies the two controls the report found missing: a contractor cost estimate and a cost limit shared with the contractor ^[7].