K-Bro said it will build a processing facility in Saskatchewan if it is able to successfully sign an agreement with the provincial organization.
Health Shared Services Saskatchewan, or 3sHealth, was created in 2012 to help provide efficient, province-wide common services to the province's health sector.
"We are very pleased to be selected as the preferred provider to negotiate a long-term contract with 3sHealth," K-Bro president and chief executive Linda McCurdy said in a statement.
"It is very satisfying to be successful in a competitive process and have the opportunity to develop our relationship with 3sHealth."
K-Bro provides laundry and linen services across Canada with eight processing facilities under several banners, including K-Bro Linen Systems Inc., Buanderie HMR and Les Buanderies Dextraze.
Shares in the company, which announced the contract talks after the close of markets, were up 22 cents at $33.67 on the Toronto Stock Exchange on Wednesday.