Australia says it will not hold an open tender to replace ageing Collins-class submarines, bolstering Japan's bid to build the new multibillion-dollar fleet.
A spokesman for Defence Minister David Johnston said no manufacturer had yet been chosen, but the country is believed to be leaning towards buying as many as 12 off-the-shelf stealth submarines based on the 4,000-tonne Soryu-class vessels built by Japan's Mitsubishi Heavy Industries and Kawasaki Heavy Industries.
Prime Minister Tony Abbott has come under pressure after a previous pledge to build the submarines at home, and several European defence contractors have said they would do the work in Australia at a competitive price in a bid to win a piece of the overall A$40bn (£22bn) programme.
But his cabinet began back-pedalling in July, signalling that cost and schedule were paramount. Last week Johnston was forced to apologise after saying he would not trust government-owned submarine manufacturer Australian Submarine Corp (ASC), which runs a shipyard in the state of South Australia, "to build a canoe".
Despite pressure for an open tender, ministers have said they need to begin replacing the Collins submarines, designed by Swedish shipbuilder Kockum and built by ASC, by the mid-2030s at the latest, and Treasurer Joe Hockey said the government did not have time for an open bidding process.
"We need to make decisions now and we don't have time to go through a speculation process," Hockey told the Australian Broadcasting Corporation.
The opposition Labor Party yesterday tried to force the government to hold an open tender using a procedural motion in the Australian Senate. Influential independent South Australian Senator Nick Xenophon criticised the lack of a tender.
"This is no way to run Australia's biggest defence procurement this century," he told the Reuters news agency. "The government is going against leading experts in naval procurement and turning their backs on thousands of Australian workers, engineers and the skills and expertise they offer our country."
The government will make a final decision in a defence review expected early next year, but sources says Canberra is keen on a new lithium-ion battery propulsion system that will feature in the next generation of Soryu submarines.
The vessels will be the world's first to be powered by the new technology, which experts say will give submarines better underwater range and speed compared to other diesel-electric vessels that use air independent propulsion under the sea, a system which requires fuel to operate.
Swedish defence firm Saab, France's state-controlled naval contractor DCNS and Germany's ThyssenKrupp Marine Systems have all expressed interest in the Australian project, but a former senior Japanese navy commander told Reuters they do not have the necessary experience.
"I think Japan is the only option for Australia because neither Germany, France nor Sweden has built 4,000-tonne class diesel submarines," he said.
Such a deal for Japan would mark its re-entry into the global arms market, just months after Prime Minister Shinzo Abe ended a ban on weapons exports as part of his efforts to steer the country away from decades of pacifism.