Dubbo Regional Council called for tenders in January with the view to the underground pipeline being built by June.

But factors including rain have altered the project's timeline.

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On Thursday, Dubbo Regional Council's director of Infrastructure Julian Geddes provided an update on the progress of "a major infrastructure project for the region".

"Recent rainfall in the catchment and improved dam levels, has alleviated the extreme urgency of this significant project," he said.

"The improved water situation has allowed for additional stakeholder engagement, further investigation of water sources and work on statutory approvals prior to awarding the contract.

"Critical to the overall response to the worst drought of record, the Water for the Future Strategy has enabled council to focus on securing additional groundwater infrastructure for Dubbo, Wellington and Geurie, while the consideration and thorough assessment of the cross-city pipeline contract has taken place."

The tender process for the pipeline was extended twice.

"The first extension was due to changes in technical design, and following these changes a number of companies requested more time to submit their amended tenders, therefore it was extended a second time," a council spokesman said in mid-May.

By that stage the tender process had closed and the council had received 19 tenders from across Australia.

"A lengthy assessment process has been undertaken, however council hasn't entered into a formal contract as yet," the spokesman said.

On Thursday Mr Geddes said a "preferred contractor has been identified".

"However, the contract for the cross-city pipeline has not been awarded," he said.

"Dubbo Regional Council will finalise the process and award the contract in the near future."

The pipeline will take 20 weeks to build.

Burrendong Dam had fallen slightly to 20.8 per cent of capacity on Thursday.

The Bureau of Meteorology is forecasting a 70 per cent chance of above-average rainfall in inland Australia this winter.

The pipeline will move recycled water from the Dubbo Sewage Treatment Plant into the city for potentially multiple reasons.

They include irrigation of recreational grounds, trading with irrigators and other users of untreated groundwater, and storage in the Upper Macquarie Alluvial Aquifer.

The pipeline will take untreated groundwater to the John Gilbert Water Treatment Plant to boost Dubbo's potable groundwater supplies.