A decision on the politically sensitive tender process for a $1 billion plan to outsource Australia's visa processing will not be made until the new year, amid a tangled web of conflicts within the federal government.

The Department of Home Affairs is in the final stages of determining the successful bidder for the project to build and manage a new online system to process and provide visas for more than 9 million applicants a year.

The Department of Home Affairs is determining the successful bidder for a project to build and manage a new online system to process and provide visas.

Industry sources have told The Age and The Sydney Morning Herald that continued delays with the project, first flagged in 2017, are risking the system not being complete and implemented before the next election.

The extended timeline for a decision, which was originally slated to be made by October this year, was also costing each bid tens of millions of dollars the longer it went on, one source said.