Smaller IT firms set for $650m windfall

Smaller Australian companies are set to get a larger slice of the federal government's technology pie under changes to the way contracts are issued.

From Wednesday, the government will cap IT contracts at a maximum value of $100 million or three years.

That will allow small and medium businesses the chance to bid for smaller parts of big projects, assistant digital transformation minister Angus Taylor said.

The government spent $6.5 billion on IT last financial year, with about 30 per cent going to small and medium-sized businesses.

Mr Taylor wants to increase that share to 40 per cent over the next 12 months, worth an extra $650 million.

"These are exciting changes that will throw open the door for SMEs and allow government agencies to bring in new and innovative services," he said.

The changes follow recommendations made by a procurement taskforce, which found that a culture of risk aversion had undermined the freedom to innovate and experiment.

"If we are to reward the entrepreneurial spirit, a new procurement culture is necessary," Mr Taylor said.