News Summary

  • A federal judge ruled Monday that the U.S. Department of Transportation (DOT) is permanently barred from withholding funds for the $16 billion Hudson Tunnel Project in New York and New Jersey over its Disadvantaged Business Enterprise (DBE) program.
  • Judge Jeannette Vargas of the U.S. District Court for the Southern District of New York overturned the Trump administration's September 30 funding freeze and prohibited the DOT from blocking fund disbursement over the project's DBE program in the future.
  • The ruling ends months of uncertainty for the project, one of the largest infrastructure efforts in the U.S. Construction had briefly halted earlier this year after the DOT stopped reimbursements, then resumed under a temporary court order.

In-Depth Analysis

The Gateway Development Commission (GDC), which oversees the project, warned in March that work could halt again in the summer if the funding issue was not permanently resolved. Monday's ruling effectively clears that legal cloud, allowing construction to proceed.

Vargas wrote in her ruling: "The DOT did not provide the GDC with an opportunity to appeal the September 30 suspension. This is a clear violation of the law."

The issue began in September 2025, when the GDC was notified that federal funding would be paused pending a review of the federally mandated Disadvantaged Business Enterprise program, which sets participation goals for women- and minority-owned firms in government contracts.

Vargas wrote in her ruling: "The September 30 suspension order jumped directly to suspending payments without finding that the GDC violated any law. This clearly violates Section 200.339 of the Uniform Guidance."

The judge noted that federal regulations do allow agencies to withhold funds, but only under key conditions: first, the agency must find that the recipient failed to comply with applicable laws; second, corrective measures cannot resolve the issue. The DOT suspended payments while reviewing the GDC's compliance but never formally found the commission in violation of federal regulations.

The court also found that the DOT failed to give the GDC an opportunity to contest the funding suspension, which is also required by federal grant regulations. Vargas wrote: "Furthermore, before terminating funding, the recipient must be afforded procedural rights, including 'the opportunity to object and provide additional information to challenge the action.' However, the DOT did not provide the GDC with any opportunity to appeal the September 30 suspension."

The ruling repeatedly emphasized the consequences of the funding freeze on on-site contractors. Vargas wrote that the project was "on the brink of a suspension-induced shutdown that would eliminate hundreds of jobs, leave active construction sites abandoned, and severely disrupt the project schedule and budget." She also noted that "the defendants do not deny that the suspension of federal funding is a blatant violation of federal law."

Vargas wrote: "The timing and sequencing of these project components are tightly coordinated to match critical tunnel access windows, optimize tunnel construction efficiency, comply with permitting and environmental restrictions, schedule utility relocations, and ensure continuity of construction across state lines. The current schedule for the Hudson Tunnel Project is—or was—to have the new tunnel operational by 2035."

The GDC recently awarded Skanska Creamer Sanzari NJSA JV a $711.7 million contract in June for the New Jersey surface connection work. The GDC said the contract means that 7 of the Hudson Tunnel Project's 10 construction packages, including all required tunnel boring work, are now underway or complete.

In response to the ruling, a DOT spokesperson told Construction Dive: "The U.S. Department of Transportation remains committed to ensuring that taxpayers' hard-earned money is used responsibly and will not fund unconstitutional, discriminatory contracting practices."

The GDC will hold its next board meeting on July 8, where project progress may be discussed.

Catherine Rinaldi, GDC Executive Vice President, told Construction Dive: "We are grateful for the support of New York and New Jersey in restoring federal funding for the Hudson Tunnel Project. Before the federal funding freeze, the Hudson Tunnel Project was on schedule and within budget; since federal funding resumed in February, we have made significant progress."