An injury-hit campaign has restricted Bardsley to just six starts in the Premier League and he has made only one appearance for the Black Cats in the past two months.
O'Neill acknowledged it has been a difficult season for the 27-year-old, but feels Bardsley is now in a position to contribute to Sunderland's survival fight.
"Phil's had a tough old season," said O'Neill. "When you're someone like him, who was injured on his second day back in pre-season, it's hard to get back to the pinnacle.
"But his fitness is improving and with that will come confidence.
"I wouldn't blame him at all if he is looking forward to seeing the back of this season so he can focus on the next one.
"But we rate him as properly fit now and the more players we have at our disposal, the better it will be at a time in the season when we need everyone at the club pulling together to get good results."
Sunderland are currently four points outside the relegation zone and Bardsley could return to the team against former club Manchester United after the international break.