Administrators for Paisley-based subcontractor Power One have claimed the firm was owed in excess of £3m by Galliford Try due to a contract dispute.
A statement of affairs for Power One Electrical Contractors Limited by administrators French Duncan Restructuring found that the contractor suffered from an acute cashflow problem at the point of collapse due to debtors owing the firm £3.58m.
Administrators reported that 96 per cent of money owed to the firm was related to payments from a disputed contract with Galliford Try, a figure disputed by the contractor, which also claims it assisted with Power One’s cashflow problems by paying them ahead of time.
The administrator’s report states: “Based on the discussions with the director and our investigations to date, the insolvency of the company was largely due to the dispute with Galliford, who, according to the company’s books and records, owe the company in excess of £3m.
“The amount of debt owed is disputed and, given the significant sums involved, the non-payment led to a major cashflow issue.
“As a result, the company could no longer continue to meet its liabilities as they fell due.”
The debt accusation has been denied by Galliford Try, which said it “did not recognise” the figures within the administration report.
A Galliford Try spokesman said the company “does not recognise” the events as set out according to the administrator’s report.
He said: “Our policy is always to deal fairly and promptly with subcontractors, suppliers and clients and we were sad to see Power One take that step.
“Payments were made to Power One through the course of the project in line with the terms of the contract, including payments made ahead of time to assist them with their ongoing cashflow issues.”
The spokesman added that additional sums being claimed by Power One concerned ”disputes over and above their contractual entitlements”.
According to the administrator’s report, Galliford Try employed five different commercial quantity surveyors over the contract period, which “made it difficult to get commercial agreement each month on the measured and compensation works”.
The report notes that Power One appointed Bibby Factors Limited and The Vinden Partnership to take over the commercial running and monthly applications on behalf of the company, with both firms launching adjudication action against Galliford.
In August the adjudicator Terence Vaughan found in favour of Power One.
However, the report states that although the adjudication was successful, “at this point Galliford altogether stopped releasing funds”.
It continues: “As Galliford made up the vast majority of the company’s debtor ledger, this had a significant detrimental impact on the company’s cashflow.”
Construction News reported earlier in September that Power One had been embroiled in a dispute with Galliford Try Infrastructure over a £9m subcontract to replace nearly 17,000 lamp posts across Northumberland.
At the time, Power One chairman Mark Ward warned that the dispute had put his company “under extreme financial pressure” with jobs at risk.
The statement of affairs for the firm shows that the debt has been given an 80 per cent discount by the administrators in an attempt to recover some of the losses.
However, the report said: “The recovery of this debt is uncertain and it is not unusual in an insolvency event to apply a discount to the recoverability of the debtor ledger.
“In this instance, an 80 per cent discount has been applied given the uncertainty surrounding the Galliford Try debt.”
At the time Power One fell into administration, the firm had employed 37 people, all of whom have been made redundant.
The statement of affairs published by the administrators showed that Power One owed £1,114,855 to unsecured creditors including HM Revenue and Customs and the Department of Trade and Industry.