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The 24-year-old from Liverpool, who led the Singapore Masters in March with three holes to play and then double-bogeyed the 16th and 17th, was three clear at the Italian Open at Tolcinsco with nine to go.
This time, however, Dougherty bogeyed the 12th and 17th and by coming home in a desperately disappointing 38 - one of the worst back nines of the day - he lost by one.
Instead Spain's Gonzalo Fernandez-Castano - six shots behind before storming home in a brilliant 30 - and Austrian Markus Brier went into a play-off which Fernandez-Castano won with a five-foot birdie putt at the second extra hole.
It was the third European Tour win of the 26-year-old's career, following the Dutch Open in 2005 and the Asian Open last season.
"It's disappointing - I just played badly," said Dougherty. "The back nine I really struggled.
"I just didn't have the shots and just couldn't keep the ball in play. It was not there technically.
"I think you learn from such experiences, though. I'll be back and hopefully I will be winning one of the big ones at home."
He finished in a tie for third with Swedes Henrik Nystrom and Fredrik Andersson Hed and also defending champion Francesco Molinari, who last year became the first home winner since 1980 and would have been in the sudden death shoot-out as well if he had holed from 10 feet at the last.
In a event reduced to three rounds because of earlier rain and the threat of final-day thunderstorms which never come, there was no hint of the problems to come for Dougherty when he opened with a 25-foot eagle putt and went to the turn in a four-under 32.
But his driving had already started to become a little wayward by then, he also appeared to be suffering a neck strain and a horrible hook down the long 12th led to a bogey six.
Suddenly he was only in a tie for the lead as Fernandez-Castano eagled the 15th after a four iron to six feet, then almost pitched in for eagle at the 17th.
After a par on the last for a 65 he still did not expect it to be enough - 18 under was the target he had set himself.
"I'm sure Nick is going to make a couple of birdies. I'm sure he is going to win this," he said. But he was wrong.
Dougherty salvaged a par on the long 15th after driving into water, but on the 17th drove into a bad lie, was short in two and lipped out from seven feet.
Brier made it a three-way tie with birdies at the 16th and 17th before missing a 20-foot attempt for another on the 18th. He and Fernandez-Castano were round in 65 and 68 respectively for a 16-under-par total of 200.
Jeev Milkha Singh, meanwhile, missed out on the third place he needed to climb back into the world's top 50 and qualify for this week's Players Championship in Florida.
The Volvo Masters champion, who a month ago became the first Indian to earn a place in the Masters at Augusta, resumed in joint seventh spot, but came only 26th after a 72.
"I wanted to get in, but I'm not too disappointed because I've done a lot of travelling lately and it would have meant another long trip," said Singh, who began the week 54th in the rankings.
France's Raphael Jacquelin could have qualified for Sawgrass as well by winning and when he posted his 65 he was in joint second place. But he eventually wound up tied seventh on 14 under.
Last year's American Ryder Cup captain Tom Lehman finished on eight under and compatriots Duffy Waldorf and Steve Jones, also invited to take part, were both five under.
ALL THE 3RD AND FINAL ROUND SCORES
(Gbr and Irl unless stated, Par 72 - event reduced to 54 holes):
200 Gonzalo Fernandez-Castano (Spa) 67 68 65, Markus Brier (Aut) 63 69 68 (Fernandez-Castano won play-off at second extra hole. Fernandez-Castano wins £193,163, Brier £128,770)
201 Fredrik Andersson Hed (Swe) 69 68 64, Francesco Molinari (Ita) 67 69 65, Henrik Nystrom (Swe) 67 68 66, Nick Dougherty 67 64 70 (£55,052 each)
202 Raphael Jacquelin (Fra) 66 71 65, Marcus Fraser 68 66 68, Alexandre Rocha (Bra) 70 64 68
203 Simon Khan 68 69 66, Birgir Hafthorsson (Ice) 67 67 69, James Heath 65 69 69
204 Mark Foster 72 68 64, Pelle Edberg (Swe) 70 69 65, Oliver Fisher 69 69 66, Phillip Archer 69 68 67, Oliver Wilson 68 68 68, Maarten Lafeber (Ned) 69 66 69, Martin Kaymer (Ger) 69 65 70
205 Gary Lockerbie 73 65 67, Garry Houston 66 70 69, Alastair Forsyth 68 67 70, Alvaro Quiros (Spa) 65 67 73, Joakim Backstrom (Swe) 62 70 73
206 Ian Garbutt 68 71 67, Mark Pilkington 71 68 67, Peter Lawrie 68 70 68, Jeev Milkha Singh (Ind) 69 65 72
207 Anthony Wall 68 72 67, Soren Hansen (Den) 69 70 68, Edoardo Molinari (Ita) 70 69 68, Kyron Sullivan 70 67 70, Brett Rumford (Aus) 66 71 70, Charl Schwartzel (Rsa) 67 69 71, Nicolas Colsaerts (Bel) 66 67 74
208 David Drysdale 70 70 68, Gareth Davies 69 71 68, Emanuele Canonica (Ita) 70 69 69, David Park 71 68 69, Sven Struver (Ger) 68 70 70, Gregory Havret (Fra) 67 71 70, Tom Lehman (USA) 70 68 70, Steven O'Hara 69 68 71, Kenneth Ferrie 68 69 71, Carlos Rodiles (Spa) 67 67 74
209 Jyoti Randhawa (Ind) 71 69 69, Sam Little 71 69 69, Benn Barham 69 70 70, Gary Murphy 71 68 70, Richard Finch 66 73 70, Jean-Baptiste Gonnet (Fra) 72 67 70, Bradley Dredge 71 68 70, Paul Broadhurst 68 70 71, Martin Erlandsson (Swe) 71 66 72
210 Andrew Tampion (Aus) 68 72 70, Anders Hansen (Den) 66 74 70, Rafael Cabrera Bello (Spa) 71 69 70, Robert Rock 71 68 71
211 Alessio Bruschi (Ita) 72 68 71, Steven Jeppesen (Swe) 74 66 71, Gregory Bourdy (Fra) 73 67 71, Duffy Waldorf (USA) 67 72 72, Steve Jones (USA) 70 69 72
212 Michele Reale (Ita) 71 68 73, Cesar Monasterio (Arg) 69 70 73, Steve Alker (Nzl) 70 69 73, Juan Parron (Spa) 67 71 74
213 Jose Manuel Carriles (Spa) 70 70 73
216 Jean-Francois Remesy (Fra) 70 68 78


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