The naval alliance responsible for building three multi-billion-dollar warships feared the large number of defects found so far had damaged its reputation, leaked Defence documents reveal.

A summary of "program issues/disappointments" obtained by the ABC offers a blunt assessment of the government-owned Australian Submarine Corporation's (ASC) work on the Air Warfare Destroyer (AWD) program.

An inspection of the first ship's mast in late 2014 "returned ASC to the starting point of poor finishing quality", the report found.

Its cable and combat systems showed "numerous defects" and this was described as a "repeat problem".

Also of concern were "ongoing weld failures of brazed pipe unions" and these would need to be replaced on HMAS Hobart, the first of three warships in the AWD fleet.

The second ship, HMAS Brisbane, "suffered large volumes" of defects that would require "significant rework".

Got a confidential news tip? Email ABC Investigations at investigations@abc.net.au For more sensitive information: Text message using the Signal phone app +61 436 369 072 No system is 100 per cent secure, but the Signal app uses end-to-end encryption and can protect your identity. Please read the terms and conditions.

It acknowledged that ASC was "progressing well to a revised plan" but concluded: "The ship managers realise the deficiency is harming their reputation, and program cost and schedule."

Last year, problems with the AWD program prompted former Defence minister David Johnston to warn he would not trust ASC to "build a canoe".

These revelations offer an insight into his frustrations and come at a crucial time as the Government prepares to announce who will build Australia's next fleet of submarines.

ASC has partnered with Raytheon Australia and the Defence Materiel Organisation to produce the Spanish-designed Air Warfare Destroyers.

So far the budget has blown out by between $600 and $800 million.

Air Warfare Destroyers 'behind schedule', more expensive

Senior analyst at the Australian Strategic Policy Institute, Mark Thomson, said construction of the first vessel was about 16 months behind schedule but a further 12-month delay was widely anticipated.

He partly blamed the "exotic alliance contracting arrangement" for the repeated delays and budget blowouts.

"No one's actually in charge," Mr Thomson said.

"You can rapidly find yourself in a situation where things go wrong and people are looking at one another passing blame."

AWD was placed on the Defence Projects of Concern list last year and a team of naval experts has been given until the end of July to get the project back on track.

A sweeping review of the Defence Department last month paved the way for the Defence Materiel Organisation, responsible for the overall management of the AWD program, to be abolished.

The Government-commissioned RAND review last month found the cost of projects such as the Air Warfare Destroyers was 30 to 40 per cent more expensive than comparable warships built overseas.

"Productivity has been low and it's only now slowly improving," Mr Thomson said.

"There'll be further problems that will need to be smoothed out."

Defence said HMAS Hobart would be 75 per cent complete when the hull finally enters the water later this month.

"There is a plan of work to be completed before float off and that has almost been completed as per the schedule," a Defence spokesman said.