Tony Abbott insists there is no secret deal with Japan to replace Australia's ageing submarine fleet with Soryu-class vessels.
Australia continues to talk to Japan as well as France and Germany about a suitable replacement.
Mr Abbott said it would be criminally irresponsible to send submariners to sea in something that was not capable of taking on whatever others could throw at Australia.
"There are no secret deals," the prime minister told reporters in Canberra when asked about any agreement with his Japanese counterpart, Shinzo Abe.
"Obviously, we want to get the best possible submarines at the best possible price."
Following Mr Abbott's visit to Japan in April last year, Australia seemed to be inching towards a sole-source deal with Japan for its Soryu-class submarines.
The 4200-tonne boats are about the size Australia needs, but would require extensive modification to increase range and endurance.
The previous Labor government promised 12 new subs would be built in Adelaide, where the existing Collins fleet was built.
But the coalition has hedged on similar undertakings it made in opposition.
That has turned into a potent political issue - South Australian Liberal senator Sean Edwards threatened to back a spill motion against Mr Abbott on Monday.
He was demanding a competitive process that would allow Adelaide shipbuilder ASC to bid for the contract.
Mr Abbott, who survived the spill motion, said there would be a competitive evaluation process and it was likely there would be an international partner, as there was with the Swedish-designed Collins subs.
However, just how the government plans to proceed on what will be Australia's biggest defence procurement, worth about $20 billion to $40 billion, is uncertain.
Finance Minister Mathias Cormann said the government wanted value for money.
"We are committed in that context to go through proper process which includes a competitive evaluation process. That is all that's been said," he told parliament.
The opposition has called for a competitive tender in which submarine makers are invited to make a detailed bid to meet Australia's needs.
That could conceivably follow an evaluation process to shortlist contenders.
Labor Senate leader Penny Wong said while Senator Edwards had declared there would now be an open competitive tender, that was not what Mr Abbott said later.
"The prime minister was prepared to play politics with the largest procurement this country will ever see in order to get a vote in a leadership ballot," she said.
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