Ruth Ejvet, 57, has taken her bosses to an employment tribunal to dispute the claims and try to get her job back.
The hearing was told she allowed the work to go to her husband Nish despite his firm’s bid being the highest.
Mrs Ejvet was head at St Margaret’s Church of England School in Barking, east London. In 2014 a development at the school was signed off, going to a company co-owned by Mr Ejvet and his brother, the tribunal heard.
After the work was finished there were complaints of faulty toilets and an extra £100,000 was spent fixing mistakes.
Genesis Education Trust took over the school in April 2017 and turned it into an academy. Trust CEO Beverley Hall later called in police claiming “there was a significant amount of money which had not been following due process”.
Prosecutors decided it was not a criminal case but Mrs Ejvet, of Theydon Bois, Essex, was sacked in January 2018.
She claims she was fired because Mrs Hall wanted to take over, for whistleblowing and because of ill health.
The tribunal will publish its judgment at a later date.