The existing manufacturer of British passports is appealing against the decision to use a Franco-Dutch supplier after Brexit.
De La Rue lost the £490m contract to Gemalto, which is based in France, in March.
The British company admitted its bid was not the cheapest but said it was "the highest quality and technically most secure".
The Home Office said the chosen firm met the needs of the passport service.
The burgundy passport, in use since 1988, will revert to its original blue and gold colour from October 2019. However, people are expected to keep their current passports until they expire.
A spokesperson for De La Rue said: "We can accept that we weren't the cheapest, even if our tender represented a significant discount on the current price.
"It has also been suggested that the winning bid was well below our cost price, which causes us to question how sustainable it is."
The decision to give a foreign company the contract had been criticised by pro-Brexit government figures.
Under EU procurement rules, the Home Office was required to open up the bidding process to European firms, although De La Rue has manufactured UK passports since 2009.
The Home Office said 20% of blank passport books are currently already produced in Europe.
It also said the new deal could save the taxpayer £100m-£120m and that 70 new jobs would be created in the UK, at sites in Fareham, in Hampshire, and Heywood in Lancashire.
The legal challenge comes as a Daily Mail petition calling for the Home Office to give the contract to a British firm reached 266,000 signatures.
The Home Office issues more than six million passports annually and is the only provider of passports to British citizens.