Orange City Council began work on the project at the intersection of Icely Road, Wakeford Street and Winter Street in December to avoid affecting school traffic when students returned next week.

But when excavation work began, water from an unknown underground source starting flowing into the work site.

Council crews have spent nearly two weeks excavating and checking a number of water pipes and other underground services for the source of the leak.

However, testing to discover if the water was from a natural spring or an unknown leak from a pipe returned inconclusive results. 

In the meantime, water flow has now been channelled into a nearby drain and council engineers have changed the road design to increase the depth of the pavement foundations.

A large volume of water-logged foundation material has been removed from site.

The efforts have put the project about two weeks behind schedule.

The intersection remains closed and the existing detours will remain in place until the works are complete.

The council will install extra electronic message boards around the school to assist drivers and drivers should leave extra time to follow the detours when school returns.

The roundabout was federal government-funded.