Councillors picked McNamara from a four-strong shortlist to build the £27m scheme just days before the firm went into receivership last week owing €1.5bn.

Rival contractors told the Enquirer that McNamara’s bid came in £5m below its nearest rival – but that figure has been denied by the council.

The fall of McNamara has caused chaos across Ireland and is the highest profile failure of the construction crisis engulfing the country.

The Westminster Lodge job was due to be one of the firm’s largest schemes in the UK.

But the collapse has embarrassed St Alban’s council who assumed the company was financially sound after being assured by a credit checking agency that McNamara was “less likely to fail than the industry average”

One contractor close to the bidding told the Enquirer: “McNamara’s quote was £5m shy of everyone else’s so the council went with them despite a lot of people knowing their problems.

“Trade contractors were refusing to price up work with them because they knew they wouldn’t get paid but the council still went ahead with the lowest quote.”

But the council dismissed the £5m figure as “wildly inaccurate” although it declined to reveal any figures because it “cannot disclose confidential commercial information relating to the bid”.

Work was due to start on the leisure centre in January and the council is now talking to rival firms who lost out in the original race.

Cllr Anthony Rowlands, portfolio holder for sport and leisure, said the council had been “prudent” in carrying out further financial checks on the company.

He said: “The council is now acting swiftly to ensure that the project to construct the new Westminster Lodge leisure centre does not slip.

“The council has already begun preparation work on the site and the construction of the leisure centre is due to commence in the New Year once another contractor has been formally appointed.”

The Westminster Lodge scheme includes provision for a 25m x eight-lane main pool, a 17m x 10m training pool and a four-court sports hall as well as a fitness gym, exercise studios and a café/bistro.

A council statement said: “Michael McNamara & Co had been informed of the Council’s decision to award them the contract for the design and construction of the new Westminster Lodge Leisure Centre, subject to (i) the Alcatel standstill period requirements and any challenges that may be brought during that period and (ii) the Council’s Head of Legal and Democratic Services being satisfied with the final contractual arrangements.

“In the light of the new information, he was not satisfied.  No contract exists between the St Albans City & District Council and Michael McNamara & Co.”