The Federal government will spend nearly $10 billion on information technology this financial year, a massive boost of nearly $3 billion since the Coalition came to power.

As the government looks to make deeper cuts in other areas, spending by the public service and military establishment has soared from $6.7 billion in the 2014-2015 financial year to $9.3 billion in 2015-2016 and is projected to grow by another $300 million this year, the office of Digital Transformation Minister Angus Taylor has confirmed.

Mr Taylor said the Commonwealth was playing catch-up after years of neglect and under-spending on vital IT infrastructure and that bringing Australia's federal public sector up-to-date in its use of technology would prove to be money well spent.

But small Canberra firms say they have been locked out of the benefits of the public service's IT spend and the city's business lobby is calling on the government to make good on its rhetoric about inviting smaller tech players into the Commonwealth fold.

Big projects like the new welfare payments system and the Defence Department's "enterprise resource planning" job are driving the increase in spending and Mr Taylor argues that much of the work is long overdue.

"Our IT infrastructure and services have been run down for many years and we're re-investing," the minister said.

"That re-investment program began when we got into government in 2014, the work began, and now it's starting to hit.

"Everyone understands that the business of good government these days requires good IT, good data and good processes.

"We in the government have come to that conclusion and the truth is that future governments will get as much if not more of the payback than us but it's the right thing to do for Australia.

"Too many governments have put this off, we can't keep putting it off."

Mr Taylor acknowledged the public service had to do better to avoid more high-profile tech-wrecks but said he was confident his reforms would bear fruit.

"There are always teething issues with big projects and the key for us is to break these big projects into smaller pieces, become more agile, broaden the vendor base and we'll get better results that way," he said.

"What we do need is the right oversight and that is what we've been doing with the evolution of the Digital Transformation Agency," he said,

"You can't have this increase in spending without really effective central oversight and approvals with a technology bent, not just a financial bent.

Mr Taylor said he had encountered skepticism among his cabinet colleagues over the large sums of money being spent, with the budget mired deep in deficit.

"There should be skepticism about big-spending IT projects and we should be tough about getting the best bang for our buck and we are toughening up those process," he said.

Part of the new approach to government IT is a deliberate strategy to move work to smaller local players and away from the group of multi-national giants who have dominated the sector for years.

Robyn Hendry, Chief Executive of the Canberra Business Chamber, says the city's 1000 ICT businesses, which employ about 8000 workers, need change badly.

"We've been hearing for years how hard it is doing business with the federal government from our local providers." Ms Hendry said."Local ICT businesses have been "locked out" of the procurement process. "We think some of the areas the government is seeking is a particular strength in our market, particularly cyber-security.

"While cyber-security firms in Melbourne and Brisbane have scale, there is a cluster of providers in Canberra, which have specialised cyber-security knowledge combined with an understanding of government policy development, giving them an advantage."