Any delay in replacing the navy's Collins submarines could result in strategic risk "with a capital R", says the head of a major defence company.
Raydon Gates, chief executive of Lockheed Martin Australia, said a delay in the timetable could result in a capability gap.
A capability gap is the period of potentially years between retirement of the ageing Collins subs and the arrival of their replacements, when Australia has no or few submarines available for operations.
"That comes down to strategic risk, real strategic risk," Mr Gates told reporters in Canberra.
"There is increased urgency."
Under the government's competitive evaluation process, German, French and Japanese builders are bidding to build the new submarines. Bids close in November with the winner scheduled to be announced early next year.
Mr Gates said if all went to plan, the first of the new boats will be in the water about 2025, when the first Collins is set to retire.
But it will be close.
"I think the official term is a 'poofteenth'; there is really no room," he said.
In the debate over where the new subs will be built, it has not been appreciated that there will probably need to be a second competitive evaluation process to choose a combat systems integrator. This will potentially add to the delay.
The combat system links submarine sonar and periscope, communications, navigation and weapons, displaying data on screens in the command centre. That is up to 20 per cent of the overall project cost.
The government has stipulated that the new boats be equipped with a combat system and heavyweight torpedo jointly developed by Australia and the US and in use on the Collins subs.
Of all Collins' many problems, getting the combat system to work properly was the most complex, protracted and costly.
Mr Gates said he expects a competitive evaluation process to choose the combat systems integrator will pit Lockheed Martin Australia against Raytheon Australia, which performed integration work on the Collins subs and air warfare destroyers.
Lockheed, in collaboration with defence companies Thales Australia and Saab Australia, will open a submarine combat system laboratory at its facility in Mawson Lakes, Adelaide.
Mr Gates said this is all about risk reduction.
"The ability to seamlessly integrate the best sensors, sonar, radar, navigation, imagery systems and weapons, will give Australia's future submarine the tactical advantage it needs," he said.
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