The Gateway Development Commission has restarted limited construction activity on the Hudson Tunnel Project, even as uncertainty surrounding federal funding continues to cloud the $16 billion effort.
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According to a case filed Monday in the U.S. Court of Federal Claims, work resumed in a constrained capacity after a temporary restraining order compelled the U.S. Department of Transportation to release more than $205 million in previously paused payments.
However, nearly $19 million tied to a January reimbursement request remains outstanding and is due March 2, according to the filing. The DOT has also declined to confirm it will not attempt to claw back funds already distributed should the restraining order be overturned on appeal.
The legal battle stems from a funding pause initiated Sept. 30, 2025, by President Donald Trump’s administration. The pause was launched to review the commission’s race- and sex-based contracting goals under the federal Disadvantaged Business Enterprise program. The administration later removed those criteria from the program.
The halt triggered a breach-of-contract lawsuit by the Gateway Development Commission in early February after more than $205 million in payments went unpaid. Earlier this month, a federal judge ordered the DOT to resume funding, resulting in the release of those past-due dollars.
Still, the DOT is seeking to stay the temporary restraining order and has not guaranteed that it will continue payments if the order is lifted.
“Certainty of funding is exactly what GDC’s Grant and Loan Agreements with DOT are designed to confer,” the GDC said in its filing. “As things stand, DOT could attempt to reclaim the money it has paid under the [temporary restraining order] at any time — potentially forcing another costly work suspension.”
The uncertainty has already disrupted progress on two major construction packages, including the Hudson River tunneling contract. The previous suspension resulted in “millions of dollars in additional costs, including those for additional security at work sites for the duration of the shutdown,” according to the commission’s filing.
To manage risk, the GDC has deferred key contract awards needed to maintain the established project schedule. It has also issued letters limiting work for certain professional services contractors.
Financial pressure may intensify in the coming weeks. An additional $18.9 million reimbursement request for January costs is due soon, and February claims are scheduled for April 1. The DOT has not committed to paying those amounts if the restraining order is stayed.
“DOT has refused to confirm that it will pay that money if the [temporary restraining order] is stayed, meaning that GDC may soon have to amend its Complaint to add a breach of contract claim for the March breach,” according to the filing. “Again, GDC has no certainty as to whether those claims will be paid or whether DOT will breach again, especially because of the government’s own decision to continue appealing this [temporary restraining order] before the Second Circuit.”
The Hudson Tunnel Project is a central component of the broader Gateway Program, aimed at modernizing and expanding rail infrastructure between New York and New Jersey. Prolonged funding instability could increase costs, delay timelines and strain relationships with contractors already mobilized for complex tunneling work beneath the Hudson River.
Repeated suspensions risk driving up insurance, security and remobilization expenses — costs that could ultimately fall to taxpayers if federal reimbursements are not secured.
While limited work has restarted, the ongoing litigation and appeal process mean the project’s financial footing remains unsettled. For now, the Gateway Development Commission continues advancing the project cautiously, balancing forward momentum with the risk of another potential funding interruption.
Originally reported by Sebastian Obando, Reporter in Construction Dive.
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