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Procurement changes blamed for company downfall

Changes to procurement practices in one local authority have been blamed for the downfall of a construction company.

Chichester-based firm Underwood Construction went into administration due to a delay in major contracts and reforms to local procurement practices, Insider reported.

Creditors of the £5 million-turnover company are now waiting to discover how much money they will be able to recover. However, estimates suggest it will be in the region of 42 pence to £1.

Stephen Powell and Gordon Johnson of insolvency firm HJS Recovery are acting as joint administrators for Underwood Construction and were appointed on June 10th.

In the last financial year, sales fell by £1 million at the company, creating a pre-tax loss of £385,285.

According to a report seen by Insider, problems emerged when West Sussex County Council changed its procurement procedure, making it more complicated to get approval to a list of tenders. Previously, the council had been one of Underwood's main clients.

What's more, a contract had been expected to start at the University of Brighton at the beginning of June, but this was postponed until later in the year, the news provider explained.

Underwood Construction owed unsecured creditors around £1.2 million at the time they appointed HJS.

It is believed £920,000 was due to trade creditors and suppliers, while £100,000 was earmarked for HM Revenue and Customs. A shortfall of more than £700,000 has been forecast.

Underwood Construction continues to trade under Harmen Construction and has worked on projects including Portsmouth College.

In this instance, an internal and external refurbishment of three existing college buildings was required.

The company was mandated to incorporate the integration and modification of the mechanical and electrical services.

Yet changes to procurement practices have made public sector work more challenging, including greater calls for sustainability.

Many local authorities are also looking to consolidate their supplier base, while enhancing diversity, creating another barrier for some construction companies bidding for work.

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Posted by John Dixon

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