updated 8/14/2006 6:02:01 PM ET 2006-08-14T22:02:01

The federal government has placed an order with a California company for millions of the smart chip-embedded passports that the State Department began issuing Monday.

The new U.S. passports include an electronic chip that contains all the data contained in the paper version — name, birth date, gender, for example — and can be read by digital scanners at equipped airports. They cost 14 percent more than their predecessors but the State Department said they will speed up going through customs and help enhance border security.

Production started at the Colorado Passport Agency and will be expanded to other production facilities over the next few months, the State Department said Monday.

The new passports contain multiple security features to prevent the information on the chips from being read, cloned, tracked or changed by outsiders, although privacy groups continue to raise concerns about the security and necessity of the electronic information.

Numerous companies competed the last two years to provide the technology. Two were selected to provide the technology: San Jose-based Infineon Technologies North America Corp., a subsidiary of Germany’s Infineon AG, provided the technology used in the pilot phase and received the first official order on Friday for several million from the Government Printing Office, which is manufacturing the passports.

Meanwhile, one company not selected to provide the passport technology is appealing the government’s procurement decision. On Track Innovations Ltd., was notified July 31 it was eliminated from consideration, and is appealing that decision, a spokeswoman for the Fort Lee, N.J. company said last week.

On Track was first eliminated last year, but appealed that decision in the U.S. Court of Federal Claims in Washington, D.C., which in December found in favor of the company and ordered it be reinstated.

Despite the legal dispute, the e-passport program remains on schedule, according to a GPO spokeswoman.

“There are no delays associated with the current litigation,” spokeswoman Veronica Meter said Monday. “We are on schedule.”

French firm Gemalto announced earlier this month it also has a contract with the GPO to provide samples of its technology for further, pilot production.

Neville Pattinson, director of technology and government affairs for Gemalto in Austin, Texas, would not discuss financial terms of the contract. He acknowledged the economic potential is massive, noting that the State Department issued 10 million passports in 2005 and expects that to increase to 13 million this year.

Citizens who get new passports can expect to pay more. New ones issued under this program will cost $97, which includes a $12 security surcharge added last year. But not all new passports will contain the technology until it’s fully rolled out — a process expected to take a year. Existing passports without the electronic chips will remain valid until their normal expiration date.

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