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Derby train-maker Bombardier is in a head-to-head contest to for a major contract to supply rail carriages for the Thameslink project.
The company, which employs 2,000 people, aims to win the battle with Siemens Mobility for the deal to supply 1,200 carriages.
A spokesman for the DfT said in a statement: "The department will now commence an intensive period of confidential negotiations with the two remaining bidders, Bombardier and Siemens after deciding not to take the third company, Alstom forward to the next stage of the competition, and will look to award the contract in due course.
Eelier this year Bombardier told 77 temporary workers not to come in to the Litchurch Lane factory for two weeks as it had run out of parts to complete orders due to some of its suppliers struggling with finances delivery of vital parts.
If granted, the contract could bring a huge boost to employment and business in Derby
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