Tony Abbott has denied cutting a secret deal with Japan to buy new submarines amid growing confusion over the Government's plan to replace Australia's ageing Collins Class fleet.
South Australian Liberal senator Sean Edwards claimed on Sunday that the Prime Minister had given him an assurance Australian companies would be given a chance to bid to build the submarines.
Mr Abbott' s promise was apparently given in return for the senator's promise to support Mr Abbott in the leadership spill vote.
Before the 2013 Federal election, the coalition had promised to build 12 new submarines in South Australia - a program that would likely cost tens of billions of dollars.
But since the election the Government has sent strong signals it is preparing to buy an "off-the-shelf" submarine designed and partly built overseas to avoid cost overruns and delays.
There have been suggestions Mr Abbott has done a clandestine deal with Japanese Prime Minister Shinzo Abe to partly build a Japanese-designed Soryu Class submarine in Australia, but this arrangement would be torpedoed should Mr Abbott lose his job.
Mr Abbott denied yesterday that any agreement had been made.
He said it was "possible, maybe even likely" that an international partner would be found to build new submarines for Australia.
"Well, there are no secret deals," Mr Abbott said.
"We want Australian submariners . . . in a really world-class submarine."
Mr Abbott said Australia was continuing to talk to Japan, German and France about building a new sub.
Senator Edwards said his understanding was Mr Abbott had agreed to allow an open tender for the subs, but Mr Abbott said he had agreed only to a "competitive evaluation process".
Senior Defence officials are privately expressing confusion as to what a competitive evaluation might mean, while warning against more delays in finding a Collins replacement.
Andrew Davies, from the Australian Strategic Policy Institute, said the Government's acquisition process for new subs was "unclear".
Dr Davies said that a more open competition for a replacement submarine would make a deal with Tokyo less likely, because Japan was not a very experienced player in the highly competitive global arms export market.
Opposition Leader Bill Shorten questioned why Mr Abbott had not moved to an open tender for new submarines earlier.