Steps:
- For cake: preheat oven to 350. Butter and flour three 9"-diameter cake pans with 1-1/2 " sides. Sift first 5 ingredients into medium bowl. Mix water, oil and vanilla in large bowl. Whisk in dry ingredients. Divide batter among pans. Sprinkle 1/2 cup chocolate chips over batter in each pan. Bake cakes until tester inserted into center comes out clean, about 25 minutes. Cool cakes in pans on racks 15 minutes. Cut around pan sides to loosen cakes. Turn cakes out; cool completely. For frosting: beat butter in large bowl until fluffy. Gradually beat in 3 cups sugar. Beat in 6 Tablespoons milk and vanilla. Add cocoa and remaining 2 cups sugar; beat until blended, thinning with more milk if necessary. Place 1 cake layer, chocolate-chips side up, on platter. spread 2/3 cup frosting over. Top with remaining cake layer, chocolate-chips side down. Spread frosting over sides and top of cake. (Can be made 1 day ahead. Cover with cake dome; let stand at room temperature.)
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