The facilities will train workers that might one day be employed to help build the Federal Government's $43 billion National Broadband Network.
The GippsTAFE facility is expected to supply some of the 25,000 jobs a year the Government estimates will be required to construct a National Broadband Network over the next eight years.
The Institute will use the money to upgrade the Chadstone-based facility's telecommunications, gas and electricity training yard and teach students how to lay underground and overhead telecommunications cables.
The news has been well recieved in the local industry.
Ric Clark CTO Alcatel-Lucent said getting Australia's workforce trained up to support the roll out of the national broadband network is an important part of the bigger project.
"There are potentially 25,000 new jobs up for grabs, and some unique skill sets needed, for example in the areas of optical engineering," he said.
"To get this network built, Australia needs to have people trained with the right skills and ready to fill these roles - which is something the government's announcement today is a good step towards."
"It is fantastic news that at a Federal Government level, Rudd is prepared to make the investment to educate and train Australians to service Australia as opposed to outsourcing or bringing in global infrastructure firms," said Guy Coles, vice president of APJ, for local security vendor Astaro.
"It's a wonderful thing to see the government investing in its own IP," he added.
Andrew Hindmarch, APAC regional product marketing manager for 3Com said the news is very positive.
"It is a good idea as long as the training focuses on broad based skills and is not tied to a particular vendor's technology so that it operates an open policy.
"From 3Com's perspective we would like to see imput from all vendors."
Tony Malligeorgos, vice president of marketing & business development Ericsson A/NZ said while Australia possesses a strong, highly competent workforce able to deliver the NBN, it sees a continued need for skills development in ICT to ensure the country's future growth and competitiveness.
The cash will also pay for three state-of-the-art technology training classrooms and a fibre optic training room.
Today's announcement is one of the 31 projects funded in this year's budget as part of the $934 million worth of Round Two funding from the Education Investment Fund.
GippsTAFE will become one of a series of technical colleges across the country with the specialist facilities.
GippsTAFE is one of the few specialist telecommunications and energy sector training facilities. It plans to invest a further $3 million of its own dollars towards the project.