Builder John Holland says it has found elevated levels of lead in drinking water before it gets to the site of the new Perth Children's Hospital, sparking fear among residents and deflecting responsibility to the WA government.

The opening of the $1.2 billion hospital has been delayed by more than a year and the construction site plagued by problems such as lead in drinking water, asbestos in roof panels and payment disputes with subcontractors. The government blamed John Holland and and ordered it to find the source…