The Department of Defence today announced a $162 million contract with Telstra for telecommunication services.

Parliamentary secretary for defence procurement, Greg Combet, said the six year contract covers the provision of mobile phones, fixed line voice, fixed line data and broadband services provided by the Chief Information Officer Group to Defence users.

Combet said defence anticipates cost savings in excess of $13 million per annum under the contract.

He said it also includes improved level of service to staff compared with previous contracts.

"I want to congratulate Telstra for being chosen as the preferred supplier based on value-for-money comparison," Combet said.

The contract was negotiated as a work order under the Australian Government Information Management Office (AGIMO) whole-of-government telecommunications supply arrangements.

Other federal government contracts announced in the past week include a $23 million application and maintenance support deal with the Australian Customs Service.

The deal was won by KAZ following the breakup of Customs' outsourcing arrangement with EDS.

Customs also inked a $14 million deal with Sagem while Centrelink announced an $18.5 million contract with Teradata.

Australia's public sector is gearing up for the Federal Budget next week which is expected to be tight as the government attempts to put downward pressure on interest rates.

Public sector research and analyst firm, Intermedium, expects a number of ICT spending cuts in addition to the formal dumping of the Access Card program.

"Even in what is widely expected to be a tough budget, there will be some areas of new spending, and they will have an ICT component," an Intermedium spokesperson added.