Just as Mr Rudd finished a press conference announcing his plans to relocate the navy's main east coast base from Sydney's Garden Island to Brisbane, Mr O'Farrell stormed down to the site for a picturesque confrontation with the prime minister.
"A phone call would have been helpful," the angry premier said as the two crossed paths on the Sydney Harbour waterfront.
While the leaders shook hands, Mr O'Farrell's displeasure was obvious and he told the PM his plan would "slash" 4000 jobs.
"I'm happy to share, your predecessor could share and you should learn to share," the premier said, using his index finger to point at the prime minister.
Mr Rudd hit back, saying the move would be "for the national security".
Having failed to diffuse the tense stand-off, the prime minister quickly parted ways with the premier, bidding him farewell with a "good on you". Later in Brisbane, Mr Rudd accused Mr O'Farrell of "huffing and puffing".
"The Royal Australian Navy is not Premier O'Farrell's property," he said.
"It is the property of the Australian government making national security decisions about where our defence assets should be located in the future." Mr Rudd said earlier that a re-elected Labor government would appoint a top-level defence committee to examine how to move the navy base from Garden Island to Brisbane by 2030.
The plan has been met with outrage from the conservative NSW government, which pointed out Garden Island injects about $470 million a year into the state economy and employs 6700 people, including up to 4000 on the base.
Mr Rudd argues the location of Australia's bases and defence equipment must support co-operation with the US and Asia-Pacific partners, cover northern approaches and support humanitarian operations.
Australia also needs new facilities to handle three new air warfare destroyers and two massive landing helicopter dock (LHD) vessels, due to enter service over the next few years.
Labor's proposal is in line with the 2012 Force Posture Review, which recommended a longer term alternative to Fleet Base East, such as Brisbane.
The harbourside confrontation spoiled an otherwise solid day for Mr Rudd, who had earlier delivered a speech on his favoured topic of foreign policy.
In a wide-ranging 30-minute speech to The Lowy Institute in Sydney, Mr Rudd outlined his vision for how Australia can plan its defence, security and foreign policies in a rapidly changing Asian region.
