A new laundry facility will be built in Launceston to service Northern Tasmania's public hospitals.

Tasmanian company BlueLine has been awarded a contract to provide linen services to the Launceston General Hospital and eight primary health sites.

BlueLine plans to build a new laundry at a green field site in Launceston within three years.

The contract for hospital linen services is for10 years and was signed yesterday between the parties. It includes an option to extend for a further five years. Initially the laundry will be processed in Hobart.

"A new site will be an economic benefit for Northern Tasmania and there will be training and employment opportunities in the construction industry through use of long term unemployed on the construction site," the acting CEO of the Tasmanian Health Organisation - North (THO-N), Ms Sonia Purse said.

Ms Purse said that BlueLine had been chosen to supply services after a competitive contract process.

The contract is expected to save the State an estimated $5.39m over 10 years.

Ms Purse said laundry services were currently being delivered with old unreliable and inefficient equipment and was not keeping pace with increasing demand.

Laundry staff and their union have been briefed on the outsourcing process.

It is expected that a number of permanent staff will be able to express an interest in voluntary redundancy or redeployment within THO-N.  A number have already taken up work opportunities elsewhere in the hospital.

The current laundry will continue to operate until 1 December 2012. Fixed term staff will conclude at the end of their contract.