Dive Brief:
- A federal judge permanently blocked the U.S. DOT from withholding funds for the $16 billion Hudson Tunnel Project in New York and New Jersey over its disadvantaged business enterprise program, according to a Monday ruling.
- Judge Jeannette Vargas of the U.S. District Court for the Southern District of New York threw out the Sept. 30 funding freeze levied by President Donald Trump’s administration and barred DOT from blocking funds over the project’s DBE program going forward, according to the court ruling.
- The decision follows months of uncertainty for one of the nation’s largest infrastructure efforts. Construction briefly halted earlier this year after the DOT stopped reimbursements before ultimately picking back up again under a temporary court order.
Dive Insight:
The Gateway Development Commission, which oversees the project, had warned in March another work stoppage could occur in the summer without a permanent resolution regarding the funds. The ruling effectively removes that legal cloud and permits construction activity to now progress.
“DOT provided no opportunity for GDC to appeal the September 30 Suspension,” Vargas wrote. “This is clearly contrary to law.”
Issues started on the project in September 2025 when the GDC received notice that federal disbursements would cease pending a review of the federally mandated Disadvantaged Business Enterprise program, which sets goals for the inclusion of women- and minority-owned firms on government contracts.
“The September 30 Suspension skipped right to payment suspension without any finding that GDC had violated the law,” Vargas wrote in the ruling. “This was clearly contrary to Section 200.339 of the Uniform Grant Guidance.”
Federal regulations do allow agencies to withhold grant payments, albeit under key circumstances. First, the agency must determine a recipient failed to comply with applicable laws and, second, corrective measures would not resolve the issue, the judge wrote in the ruling.
The DOT instead suspended payments while it reviewed GDC’s compliance and never made a formal finding that the commission broke federal regulations, according to the opinion.
The court also found the DOT failed to provide GDC an opportunity to challenge the funding suspension, another requirement under federal grant regulations.
“Further, grantees must be afforded process prior to grant termination, including ‘an opportunity to object and provide information challenging the action,’” Vargas wrote. “Yet DOT provided no opportunity for GDC to appeal the September 30 Suspension.”
The opinion repeatedly emphasizes the consequences the funding freezes posed for contractors on the site. Vargas wrote the project was “on the cusp of a suspension-induced work stoppage that would have eliminated hundreds of jobs, left active construction sites abandoned, and wreaked havoc on the Project’s timeline and budgets.”
She also noted in the ruling that the “defendants do not dispute that the suspension of federal grants flagrantly violates federal law.”
“The timing and sequencing of these projects is tightly coordinated to meet key corridor access windows, optimize tunnel productivity, align with permitting and environmental constraints, stage utility relocations and ensure continuous constructability across state lines,” Vargas wrote. “The current Hudson Tunnel Project program schedule is — or was — designed to place the new tunnel into service by 2035.”
The GDC recently awarded in June a Skanska Creamer Sanzari NJSA JV a $711.7 million contract for the New Jersey Surface Alignment project. The award means seven of the Hudson Tunnel Project’s 10 construction packages, including all the required tunnel boring, are now in progress or complete, according to the GDC.
In response to the ruling, a DOT spokesperson told Construction Dive, “USDOT remains committed to ensuring hardworking taxpayer dollars are being spent responsibly and do not fund unconstitutional, discriminatory contracting practices.”
GDC will hold its next board meeting on July 8, where it will likely cover project updates.
“We are grateful for New York and New Jersey’s support to restore federal funding to the Hudson Tunnel Project,” Catherine Rinaldi, GDC executive vice president, told Construction Dive. “Prior to the freezing of federal funding, the Hudson Tunnel Project was on schedule and on budget, and we have made significant progress since federal funding for the project resumed in February.”
