Northrop Grumman Corp. and CGI-AMS have been selected by the state of Virginia to spearhead its 10-year, multibillion-dollar IT transformation initiative.

Both contracts require final approval of Gov. Mark Warner. No timetable was available for when contract negotiations will conclude and the final terms established.

Northrop Grumman beat out IBM Corp. for the IT infrastructure part of the project, while CGI-AMS outbid IBM for the enterprise applications portion.

The project is the result of a law Virginia passed three years ago known as the Public-Private Education Facilities and Infrastructure Act. The law altered the bid process to give contractors more room to propose creative ideas and solutions.

Northrop Grumman’s IT sector unit in McLean, Va., which won approval of its bid last week, is up for a 10-year contract valued at $1.9 billion to modernize the Old Dominion’s 1980s-era IT infrastructure and services. The project also calls for job growth in the Southwest portion of the state, more employment options for employees and an innovative funding model.

The contract, which was recommended to the governor by the Virginia Information Technology Investment Board, includes an option for one three-year renewal and includes hardware, networks, associated services and staff for mainframes, servers, desktop and laptop computers, voice and data networks, operating systems, e-mail, security, help desk services and data center facilities.

If Virginia had not pursued the transformation initiative, it would have cost the state an additional $200 million over the next 10 years to support “an increasingly outdated and expensive infrastructure,” said James F. McGuirk II, chairman of the state IT investment board, in a statement.

CGI-AMS of Fairfax, Va., was selected in early October to begin negotiating final terms of the enterprise applications architecture initiative. The potential value of the project has not been made available.

To prepare for the enterprise applications part of the project, the state and the two companies collected information related to the state’s administrative, financial, human resource and supply chain management processes across 46 state agencies earlier in the year.

Northrop Grumman of Los Angeles has about 125,000 employees and annual revenues of $29.9 billion. The company ranks No. 2 on Washington Technology’s 2005 Top 100 list of federal prime contractors.

CGI-AMS, a part of CGI Group Inc. of Montreal, ranks No. 62 on Washington Technology’s 2005 Top 100 list.