Upper Lachlan Council has decided it is more cost effective to pipe water from Gunning to Dalton than build an extra treatment plant.
Dalton water is currently drawn from bores.
Upper Lachlan's Water and Sewerage manager, Luke Maloney, reported at the last council meeting that the pipeline would be cheaper to install and cheaper to operate than setting up a water treatment plant at Dalton.
A $10.8 million water storage and treatment plant is slated to be constructed for Gunning.
Mr Moloney told council that the tenders for the design and construction of the water treatment plant was called last October, closed on December 11 and are currently being reviewed.
The preferred tender is expected to be reported at the March meeting of council. Once awarded the contract has a 12-month construction period.
Tenders for the construction of a 100 megalitre earthen reservoir are expected to be called next month.
Council has already begun construction of the 3.6km long PVC pipeline from the treatment works to Gunning, in conjunction with local subcontractors.
Money for the $10.8 million project is from a grant of $5.4 million from the federal government, $4.3 million from the NSW government and $1.1 million from the council's water fund reserve.