Scottish Water is set to spend between £450 million and £500 million a year on its supply chain as it increases the number of contractors.
The spending will take place over a four-year period from 2010 to 2014, according to reports from Construction News Plus.
Nine contractors currently work with the firm and more companies are expected to join so it can deliver more work.
Mark McEwen, general manager for capital investments, told Construction News that they needed to improve to work ahead and "avoid boom and bust".
He said that the firm was being adversely affected by infrastructure projects in Scotland, including the Commonwealth Games in Glasgow and M74 extension.
"It makes it difficult for contractors to bring in workers for the short-term if there are these other jobs where they're guaranteed work for four or five years," he added.
Mr McEwen hopes to deliver projects more effectively by developing close relationships with contractors.
