Much of the Palace’s plumbing, electrical, cabling and heating system has not been upgraded since the Second World War.
Royal officials fear the current system could collapse at any time leading to serious risk of flooding and fire.
The phased programme will be sequenced wing-by-wing to enable the Palace to remain occupied and fully operational, and allow the Queen to carry on with her official duties for the country.
Separate contracts will be awarded for each wing.
The Chief Secretary to the Treasury, David Gauke, said: “Tourists are drawn to this country because of our culture, heritage and royal legacy, and when they visit they spend billions of pounds and support thousands of jobs.
“We must ensure that the special architectural and historic nature of some of our greatest buildings are protected for future generations, therefore it is only right we ensure Buckingham Palace is fit for purpose.
“These urgent works have been properly costed and will ensure the Palace can continue its centuries-long tradition of being the working house of our Monarch.
“We will ensure every penny spent achieves the greatest value for money.”