In a March 20 motion for a temporary restraining order filed in the U.S. District Court for the Northern District of Illinois, the agency said it must begin notifying contractors and workers by March 27 and initiate demobilization immediately thereafter if federal reimbursements are not restored.

CTA officials said the pause has moved from a funding issue to an immediate construction risk, with active work now dependent on near-term court action. Contractors on both programs now face potential work stoppages, delayed payments and resequencing of planned construction packages.

The dispute centers on a new federal rule—but more broadly tests whether the federal government can interrupt funding on projects already under construction, a question with implications for transit megaproject delivery nationwide.

CTA is seeking an order compelling the Federal Transit Administration and U.S. Dept. of Transportation to resume disbursements under executed full funding grant agreements that support both projects.

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Chicago Transit Authority Launches Red/Purple Line Modernization

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The Red Line Extension—a 5.5-mile expansion from 95th Street to 130th Street including four new stations, a rail yard and maintenance facilities—carries a total project cost of about $3.75 billion, with federal participation approaching $2 billion under its grant agreement. The Red and Purple Modernization program, a multiyear rebuild of North Side track and stations, is nearing substantial completion but continues to rely on federal reimbursements for the remaining work.

CTA officials say approximately $2.1 billion in combined funding for the two projects has been paused, including roughly $1.8 billion tied to the Red Line Extension and more than $300 million for the modernization program.

The agency said construction is already underway on the extension corridor, with crews reporting to design-build contractor Walsh-VINCI performing early-stage work such as tree clearing, demolition and utility relocation, and warned that a prolonged funding interruption would force work stoppages.

Unlike typical grant disputes, both projects are proceeding under executed full-funding grant agreements that rely on continuous federal reimbursement flows to support active construction, contractor payments and procurement sequencing—making interruptions to those payments immediately consequential for project delivery.

“We are fully committed to the success of these projects, and we will take every step necessary to ensure that they move forward,” CTA Acting President Nora Leerhsen said in a March 20 statement announcing the lawsuit.

Federal Review Ties Funding to Contracting Practices

The funding freeze stems from an October 2025 administrative review initiated by the U.S. DOT following issuance of an interim final rule revising how disadvantaged business enterprise eligibility is determined and applied in federally funded projects.

In Oct. 7 letters to CTA, DOT requested detailed information on contracting practices, including DBE goals, contractor selection methods and whether race, sex or ethnicity were considered in awarding contracts or subcontracts for both projects.

In its Dec. 1 determinations, DOT concluded that CTA and its contractors “appear to have considered race and sex” in contract awards and cited the agency’s use of “Diversity Outreach Plan” requirements in procurement. DOT stated that those plans allowed bidders to receive a scoring bonus of up to 25% tied to diversity commitments and required contractors to fulfill those commitments to meet DBE participation goals.

The U.S. DOT directed CTA to eliminate those practices and certify compliance before funding could resume. For the Red Line Extension, the department also required CTA to reevaluate disadvantaged business enterprise certifications and warned that contracts or subcontracts could need to be terminated and relet if firms fail to meet revised eligibility standards.

U.S. DOT officials did not respond to ENR's request for comment on the lawsuit. However, on March 21, NBC Chicago posted on social media portions of a DOT statement that it is trying to obstruct a process it describes as "discriminatory” and "illegal."

CTA Compliance Effort Collides With Construction Risk

CTA responded on Dec. 10, certifying that it would comply with DOT’s conditions and align its programs with the revised DBE rule.

CTA’s filings identify at least one major contractor already exposed to the freeze: Walsh-VINCI Transit Community Partners, the $2.9-billion design-build team on the Red Line Extension, which the agency said has already mobilized hundreds of construction workers and engineers, project offices, field facilities, specialized equipment and subcontractors. 

More broadly, CTA said hundreds of contracting firms across the two projects depend on those payments, and warned that hundreds of workers could soon be out of work while thousands of future jobs tied to the projects would be jeopardized. The agency also initiated a reevaluation process for certified firms under updated federal criteria, with completion targeted for early 2026.

Despite that certification, CTA said the U.S. DOT has not resumed reimbursements or provided additional direction, prompting the lawsuit.

In its complaint and supporting filings, the agency argues that the federal government’s actions violate administrative procedure requirements and unlawfully withhold funds that were already obligated under executed grant agreements.

That dispute is now playing out against active construction timelines. CTA’s filings emphasize that the risk is not theoretical, warning of workforce layoffs, contractor disruption and cost escalation tied to demobilization and remobilization if work is halted.

CTA officials said demobilization could trigger additional costs tied to stopping and restarting work, disrupt contractor relationships and delay sequencing of future construction packages.

CTA said Walsh-VINCI Transit Community Partners has already mobilized hundreds of construction workers and engineers, project offices, field facilities, specialized equipment and subcontractors. 

More broadly, CTA said hundreds of contracting firms across the two projects depend on those payments, and warned that hundreds of workers could soon be out of work while thousands of future jobs tied to the projects would be jeopardized.

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National Precedent Raises Broader Delivery Questions

The CTA’s legal challenge follows similar disputes on other major transit megaprojects, including New York’s Second Avenue Subway Phase 2, where officials have argued that withholding reimbursements under executed federal funding agreements disrupts active construction by affecting contractor cash flow, procurement sequencing and ongoing work packages.

That challenge builds on litigation over the Gateway Hudson Tunnel project, where a federal court ordered restoration of suspended payments after finding DOT had not followed contractual procedures before halting reimbursements.

Those cases collectively test whether federal agencies can interrupt reimbursement flows under executed grant agreements without destabilizing active construction programs nationwide, raising broader questions about the reliability of federal funding mechanisms supporting IIJA-era transit megaprojects and can they do so based on an agency policy guidance such as the U.S. DOT's interpretation of DBE provisions in federal law. 

CTA’s lawsuit seeks emergency relief to restore funding while the broader legal challenge proceeds, arguing that the federal government cannot retroactively impose new compliance requirements or suspend payments without violating statutory and contractual obligations.

The agency’s motion asks the court to order DOT and FTA to resume reimbursements before the end of March, citing the risk of immediate and irreparable harm to ongoing projects if construction activity is interrupted. ENR requested comment from CTA officials but had not received a reply prior to press time.

The CTA case joins a growing pattern of funding disputes affecting projects already under construction, where reimbursement interruptions directly disrupt contractor payments and jobsite continuity.

With similar litigation already unfolding on the Second Avenue Subway and Gateway Hudson Tunnel projects, the issue has shifted from policy debate to delivery risk across federally funded transit megaprojects.

CTA said it will begin shutting down work if funding is not restored, a step that could trigger cascading impacts across contractors and project timelines.