The scheme will involve the redevelopment of the site in several phases, provide new office space and allow Jobcentre Plus Services to co-locate with the council.
Also included in the plans are new accessible internal meeting rooms and an improved reception area.
A new public library and improved customer service centre will also be part of the development.
Taxpayer money used on the project will be recovered through rental income from the Department for Work and Pensions (DWP) over seven years and reinvested into public services.
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The project was procured through the East Midlands Property Alliance framework, which is managed by the public sector organisation Scape Procure.
John Carlin, business unit director for the Midlands at Wates Construction, said: “We’re very happy to be collaborating with Derby City Council to improve the services it is able to offer the local community.
“We will consult with stakeholders throughout the build to ensure the very best standards and levels of continuity are achieved.”
Work has recently begun on site and it is expected to be completed by mid-2018.