Detectives have begun a criminal investigation into alleged police corruption, as recommended by a High Court judge.
The case involved a contract for police vehicle armour-plating
It follows a case in which the judge said there was evidence someone within the PSNI had undermined a firm which lost a vehicle armour-plating contract.
The contract ended up going to another firm at a much greater cost.
The PSNI said its fraud squad had begun an inquiry which was being personally supervised by a senior detective.
Sam Kinkaid, Assistant Chief Constable for Crime Operations, will be advised by an "external independent expert", the police added.
Some politicians had called for an outside force to investigate following last Wednesday's judgement.
The Policing Board, which holds the PSNI to account, has asked for the chief constable to submit a report on the case by Thursday.
The judge, Sir Liam McCollum, awarded £400,000 in damages to NI Sheet Metal Works Ltd.
The Belfast-based company took an action for breach of contract after Firth Rixson Castings Ltd was awarded the contract, at an extra cost of £350,000.
The judge said once legal costs had been taken into account, the wasteful loss of public funds was in the region of £1m.