Fed renovation review finds management failures without criminal misconduct
The Federal Reserve’s watchdog found failures in managing the renovation of its Washington headquarters, but no grounds to refer a federal criminal violation. Construction had continued for four years without a guaranteed maximum price. Fed Chair Kevin Warsh is handing project leadership to the agency that manages federal buildings, following an investigation that lasted more than a year.
Economics & Markets··Morning
Watchdog finds management failures without criminal grounds
The Federal Reserve, the US central bank, faced a mixed finding over the renovation of its Washington headquarters. Its independent inspector general identified weaknesses in project and contract management but found no reasonable grounds to believe a federal criminal law had been violated. The September 30 review also found no administrative misconduct. The inquiry lasted more than a year and was already underway at former chair Jerome Powell’s request.[1], [2]
Four years of construction without a price ceiling
Construction had continued for four years, and awarded construction costs exceeded 2 billion dollars, without a guaranteed maximum price. The board had not effectively carried out the contract’s cost-management provisions. Internal oversight was inadequate for the project’s size and complexity. The watchdog listed inflation, limited subcontractor bidding, major interior-design changes and difficult site conditions among the factors behind the overruns.[1]
After construction began, plans switched from open workspaces to closed offices. The watchdog identified a longer schedule and greater exposure to inflation following that design change. Marble, water features and a garden terrace that had attracted public criticism did not materially contribute to later cost increases.[1]
Warsh hands project leadership to federal building managers
Fed Chair Kevin Warsh told Inspector General Michael Horowitz that the General Services Administration would immediately become the project executive. The agency manages federal buildings, technology services and real estate. Powell stayed on the Fed board after Warsh took over in May. A judge had blocked Justice Department subpoenas about Powell’s Senate testimony; Washington prosecutors later ended their investigation and referred the matter to the watchdog.[1]
