Federal officials are threatening to cancel $4 billion in grants allocated for California’s high-speed rail project, citing a failure by the California High-Speed Rail Authority (CHSRA) to meet key deadlines and cost management standards. In a report released June 4, the Federal Railroad Administration (FRA), an agency within the U.S. Department of Transportation, expressed deep skepticism that the state agency can complete a promised 171-mile early operating segment by its 2033 target.

The FRA's findings also come as CHSRA faces a $6.5 billion funding shortfall for the segment. FRA officials point to a number of red flags — including a missed deadline for rolling stock procurement, ballooning construction change orders, and significant contract disputes — as justification for pulling the $949 million and $3 billion grants awarded in 2011 and 2023, respectively.

“This report exposes a cold, hard truth: CHSRA has no viable path to complete this project on time or on budget,” said Transportation Secretary Sean Duffy in a statement.

CHSRA is planning to build a high-speed rail line in two phases. The first 500-mile stretch would connect San Francisco to Los Angeles and Anaheim. The second phase would extend to Sacramento and San Diego. Construction has begun on 119 miles of the early segment, which CHSRA still plans to open by 2033.

So far, cost estimates have surged. Phase one is now projected at $106.1 billion — a sharp rise from the $33 billion estimate voters approved in 2008, and a 31% increase from the 2020 projection. Of that, federal funding has accounted for about $6.9 billion.

In response to the FRA’s claims, CHSRA pushed back strongly. A spokesperson for the agency said it “strongly disagrees with the FRA’s conclusions, which are misguided and do not reflect the substantial progress made” on the project.

“We remain firmly committed to completing the nation’s first true high-speed rail system connecting the major population centers in the state,” the spokesperson added.

The agency also pointed to Gov. Gavin Newsom’s proposed budget, which includes a plan to provide at least $1 billion annually for the project over the next 20 years — enough to fund the completion of the early operating segment, CHSRA said.

Among the FRA’s top concerns was CHSRA’s failure to finalize procurement for high-speed trains by the December 2023 deadline. According to the FRA, the authority amended its procurement timeline three times, pushing the final selection to July 2025 — a move the agency called “persistent non-compliance.”

Additionally, the FRA highlighted a wave of costly change orders. More than 1,000 were approved by March 2023, with 20 alone accounting for over $500 million. These included safety barriers to protect against potential freight train derailments. Overall, change orders since 2023 have added $1.6 billion in costs.

“The sheer volume and frequency of these change orders shows waste through an inexcusable combination of poor planning, implementation or mismanagement of contractors, insufficient legal authority and technical expertise, and other factors,” the report stated.

FRA officials also cited an ongoing contract dispute between CHSRA and Dragados/Flatiron Joint Venture. The original $1.2 billion contract for a 65-mile segment has been increased by 62% due to change orders. That dispute could delay delivery of the segment to at least August 2027, the report warned.

If CHSRA fails to complete the 171-mile segment by 2033, FRA may consider it a “material change” in the agreement — grounds for grant termination.

“Our country deserves high-speed rail that makes us proud—not boondoggle trains to nowhere,” Duffy said.

CHSRA said it is preparing a formal response. “We will fully address and correct the record in our formal response to the FRA’s notice,” the spokesperson said.

The FRA has given CHSRA seven days to respond initially and 30 days to submit a corrective action plan.

Originally reported by James Leggate in ENR West.