The Defence Department has washed its hands of negotiations breaking down between Western Australian shipbuilder Austal and German firm Lurssen on the offshore patrol vessels project.
Last year, the government made a surprise announcement it wanted a role for Austal in the $4 billion project despite the company being connected to an unsuccessful rival German bid.
Despite a special mediator being brought in, the companies announced in mid-May that Austal won't be involved after all.
"They didn't agree, and that's the nature of commercial negotiations," Defence official Kim Gillis said.
Construction on the patrol boats will begin at the end of this year in South Australia.
While the first two boats will be built in Adelaide, the remainder will be put together in Henderson, Western Australia, from 2020 - when the construction of the future frigates begins.
The 12 new vessels will replace the existing Armidale Class patrol boats.
In WA, Lurssen will work with Forgacs.
