Manley Construction Ltd has been granted leave by the High Court to challenge the decision to award the contract to another company.
The court was told Manley Construction believed it would be awarded the contract for the Bluebell Housing Project in Dublin 12 after a tendering process earlier this year.
The company expected to be on site this month.
Lawyers for the company told the court Dublin City Council had last February indicated it would formally accept a tender for the project subject to certain conditions, including the provision of a performance bond.
The company sought to make changes after having difficulty obtaining such bonds on the domestic market and a modified bond was agreed, the court was told.
However, Manley Construction was later told the City Council wanted to revert to its original conditions regarding the bond.
It was not afforded an opportunity to re-tender and was told the contract had been awarded to another company, Purcell Construction Ltd.
Manley Construction claims the decision was a breach of fair procedures.
He also granted a stay on the decision until next Friday, when Dublin City Council may respond to the claims.