A lawsuit filed against Washington, D.C., has delayed plans for a much-anticipated Marriott Marquis hotel, according to The Washington Post.

Five months ago, Mayor Adrian Fenty (D-District of Columbia) signed legislation authorizing construction of the 14-story, $550 million hotel on the corner across from the Walter E. Washington Convention Center. To be built with public and private financing, the hotel would have almost 1,200 rooms and would help Washington compete with other cities by offering a hotel with such close proximity to its convention center.

The project was scheduled to break ground as early as October, and conventions began bookings for late 2013, when the hotel was expected to open.

However, Wardman Investor LLC, a company controlled by JBG Cos., Chevy Chase, Md., one of the region’s largest real estate developers, has filed a lawsuit against the city alleging favoritism and prompting what could be years of legal delays. Local business owners and civic leaders counting on the hotel are furious about the setback.

“People finally thought they’d seen the light at the end of the tunnel,” says Alex Padro, an advisory neighborhood commissioner. “And now they’re thrown back into the darkness.”

Although the project’s equity investor still is involved, officials are concerned the legal issues eventually could cause the investor to look elsewhere.

The city chose Bethesda, Md.-based Marriott several years ago to develop the hotel and increased the public subsidy when financing grew scarce. The deal also included a 99-year lease on a city-owned site with no payments during construction or the first three years of operation.

Wardman Investor’s lawsuit is protesting the bidding process, claiming the D.C. Council acted illegally by negotiating exclusively with Marriott and granting the firm “extraordinarily favorable terms.” Although JBG did not bid during the original bidding process, the company says it would have if the original process had included the new terms negotiated with Marriott. The lawsuit is meant to halt construction and require the city to solicit new bids for the project.

JBG, which owns 11 hotels in the Washington area, is concerned competition from a convention center hotel could threaten its Marriott Wardman Park Hotel; Washington officials say the additional rooms are needed and the new hotel would not glut Washington’s hotel market.

D.C. Council member Jack Evans (D-Ward 2) is trying to get the parties to resolve their dispute.