The N5 Ballaghaderreen by pass is likely to be delayed for up to a year.
Roscommon Country Council has confirmed that the contract for the project with Roadbridge has been cancelled and a new bidder for the multi-million-euro road will need to be identified.
€2.5million euro has already been spent on the project.
According to details revealed to Councillors at the April meeting of Roscommon County Council, a total of nine million euro was advanced to the local authority to pay a contractor to carry out works on the N5 by-pass project late last year.
The money was lodged to the Council from the TII in December, with the contractor receiving €2.5m of the total in February for works carried out.
However, Roadbridge went into receivership on the 11th of March, and Director of Services Shane Tiernan confirmed that this has led to the contract for the project being cancelled as it was a breach of the terms and conditions.
He also confirmed that an under bidder on the project was already declined and that the project will now have to go back to tender and a recommencement of the bidding process will take place.
The process to appoint a new contractor is likely to take between ten and twelve months and that cabinet approval may be required to advance even more funding due to the rising costs of materials, in particular bitumen as the project was only initially costed at €120m.