CANBERRA - Australia's Defense Minister Kevin Andrews has dampened hopes that an Australian company might yet win the contract to build Australia's next generation of submarines.

Prime Minister Tony Abbott last week gave South Australian company, Australian Submarine Corporation, renewed hope it would win the lucrative construction contract but Andrews on Tuesday moved to clarify the government's position, saying the decision would now be subject to a "competitive evaluation process."

Speaking at a media conference on Tuesday, Andrews said: "We have to evaluate this, we have to do it in a way which is methodical and cautious ... And obviously there has to be a competitive element to that."

"I am the defense minister, I am deciding the way in which we go forward this and the way we are going forward with this in a competitive evaluation process."

This would seem to be at odds with Abbott's comments at the weekend, when the prime minister said: "You would expect Australian suppliers to get a fair go."

Andrews' intervention caught South Australian members of parliament by surprise. South Australia Liberal Senator Sean Edwards said the term "competitive evaluation process" had not been mentioned until now, and he was disappointed at the apparent about-face.

"When I spoke to the prime minister and I said 'let me be very clear, does that mean ASC would be able to participate in this process?' And he confirmed that they would," Edwards said.

The debate surrounding the submarine contract is the latest in a string of controversies which has marked the tender process.

In October 2014, Abbott explained that Australian companies would not be given preferential treatment, for fear the Australian Defense Force was left with "substandard" submarines.

The following month, the then Defense Minister Senator David Johnston lashed out at the Adelaide-based ASC, saying he would not trust it to "build a canoe."

Until this recent debate, the leading contenders for the contract were Japanese shipbuilders, with the Japanese government ready to sign a deal to build a new fleet of Soryu-class submarines.

On Tuesday, the federal opposition accused the prime minister of reneging on that deal in a cheap attempt to gain votes before the Liberal Party's leadership spill motion on Monday, which was voted down 61 votes to 39.

Labor Senator David Feeney said he was shocked the prime minister would use the contract as a bargaining tool for holding office.

"How can it possibly be that a project of this significance is bandied across the Liberal Party's factional maneuverings like a bargaining chip? It is a desperate outrage," he said.