Palantir intends to sue the London mayor, Sadiq Khan, after he blocked a contract between the US spy-tech firm and the Metropolitan police.

The Met had planned to use Palantir’s software to automate intelligence analysis in criminal investigations, until Khan intervened in late May, sparking a row between the UK’s largest police force and the mayor’s office.

Khan said there had been a breach of procurement rules in the contract and suggested Palantir had been the only contender.

Now the Times has reported that Palantir’s lawyers have written to the Mayor’s Office for Policing and Crime saying they intend to challenge the decision in court. Khan’s office confirmed they had received the letter. Palantir declined to comment for this article.

A spokesperson for Khan’s office said: “The Met did not present its procurement strategy as required and the Met only fully engaged with one potential supplier: Palantir.”

They added the decision was not made on the basis of “values or political considerations” but rather the procurement process “did not adequately demonstrate value for money for Londoners”.

The Met’s potential deal with Palantir, worth £50m, is one of a series of agreements between the US software company and UK government bodies now under fire amid a wave of mounting distaste over the company’s public ideological statements.

On Tuesday morning, the technology secretary, Liz Kendall, confirmed the government was conducting a full review of the NHS contract with Palantir, assessing whether to extend the £330m deal or activate a break clause that would allow it to stop using the company’s services in early 2027.

Last week, a parliamentary committee urged the government to trigger a break, calling Palantir’s presence an “unacceptable point of weakness” in a public sector increasingly reliant on a handful of US tech firms.

In April, Palantir published a mini-manifesto on X extolling the benefits of US power and implying some cultures were inferior to others, in what one MP called “the ramblings of a supervillain”.

Speaking at the SXSW business and technology conference last week, Wes Streeting described some of the company’s executives as “Blofeld villains” – but did not say whether he thought the contract should be broken.

Asked about the review of Palantir’s NHS contract, David Lammy, the deputy prime minister, said it is important there is “diversification” among each department’s government contracts.

He said: “I would support the call that we heard last week from the select committee wanting to ensure that public service delivery departments are diverse … I support the review that I understand the secretary of state for health is looking at in relation to Palantir in the health service. Diversification is the key.”

Clive Lewis, the Labour MP for Norwich South, said: “In a democracy, democracies can change their mind and democracies are sovereign.

“You look at other countries who have stayed well away from Palantir – France and Germany. They have had the same briefings every other European country has, which is to allow a company like that, with the close connections it has to unsavoury political views, is asking for trouble.”