SNC-Lavalin Group Inc. (SNC.TO) is outsourcing the bulk of its information technology operations to back-office supplier CGI Group Inc. (GIBa.TO) in a $500-million deal that kick starts a new business improvement effort at Canada’s largest engineering firm.

Under a 12-year agreement announced Wednesday, SNC-Lavalin said it will outsource the majority of its technology management and application needs to its cross-town partner.

The deal will see 400 IT employees at SNC migrate to CGI with projected annual savings for the engineering firm of 20 per cent on its IT operating costs over the life of the pact. SNC will keep responsibility for its IT strategy, cybersecurity and the development of applications related to its core engineering business, the company said.

“This will enable us to reinvest to improve our competitiveness,” SNC Chief Executive Neil Bruce said in a statement.

The CEO said it marks the first of many initiatives to be completed as part of a new operational improvement effort which started at the end of March. That exercise comes on the heels of a separate sweeping cost-cutting drive expected to help reduce expenses by about $100-million in 2016. The goal is to achieve an annualized EBITDA margin on its core engineering and construction business of 7 per cent by 2017.

“We will look at every opportunity as it comes up in order to get to that” margin, Mr. Bruce told analysts on the company’s first quarter conference call on May 5, pointing to the company’s recent consolidation of some office space and properties as an example of the type of initiatives being pursued.

Mr. Bruce and his predecessor, Robert Card, have pared down SNC’s work force over the past four years to some 37,000 employees from more than 40,000 in a push to jettison less profitable business lines and boost returns. Its employee count is now just slightly larger than Montreal-based WSP Global Inc., which has about 34,000 workers.

SNC shares fell 0.5 per cent in early Toronto trading Wednesday to $51.32. They’ve gained 25 per cent since the start of the year.

The deal comes a day after SNC-Lavalin said it would try to win a settlement with the Quebec government to repay sums from public contracts won through fraudulent acts stretching back to 1996. The company has 30 days to submit a formal proposal under Quebec’s voluntary reimbursement program.