BERLIN—Berlin’s royal palace, which East German authorities demolished 60 years ago, won't be rising again as soon as expected. The Federal Cartel Office’s procurement department ruled last week that the contract signed with Italian architect Franco Stella to reconstruct the building was void and ordered a review of his eligibility for the prize.

Hans Kollhoff, a rival architect who finished third in the design competition that awarded the contract, had complained to the Cartel Office that Stella’s firm did not meet the legal requirements for winning. Rules sanctioned by Parliament required that firms have at least four employees or €300,000 ($439,000) in sales. Kollhoff alleged that Stella planned to subcontract the construction to other firms and should have been disqualified. A representative for German Construction Minister Wolfgang Tiefensee, who is overseeing the reconstruction, said the ministry would appeal the decision to the Düsseldorf Higher Regional Court, arguing that the winning firm had met the selection criteria.

The effort to rebuild the palace that once housed the rulers of Prussia and the Kaiser has generated controversy. Some architects have expressed displeasure over plans to re-create the baroque exterior, while others have questioned whether the building is worth rebuilding at all.

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