An Australian-owned company specialising in security and military equipment has accused the Defence Department of dubious contract tendering processes and questioned whether local jobs are actually being prioritised.

Key points: Point Trading claims it has spent around $2 million to meet contract negotiation requests

Point Trading claims it has spent around $2 million to meet contract negotiation requests Australian Defence Force made multiple changes to the tender without properly communicating them

Australian Defence Force made multiple changes to the tender without properly communicating them Turnbull Government is committed to creating Australian jobs, spokesperson says

Melbourne-based business Point Trading Group has been involved in lengthy legal action against Defence after its contract negotiations to supply grenade launchers to the Australian military were terminated in 2011.

Point Trading claims it has spent about $2 million to meet contract negotiation requests, but the Australian Defence Force made multiple changes to the tender without properly communicating them.

CEO Avner Klein said he had now taken the unusual step of going public with his frustrations because he believes his company is one of many Australian manufacturers that has tendered for Defence contracts in good faith, but has "paid the price" for placing trust in the system.

"I've heard that one company's IP was effectively used by the Defence Department. In another case, the Defence Department changed the specifications of a tender mid-tender to suit a particular product and effectively ensure the success of one bid over the others," Mr Klein said.

"The Defence Department published a tender but ultimately purchased a fraction of what it initially requested. In other words, Defence reduced the purchase amount so as to make the tender no longer profitable for the tenderer.

"The problem is that even though plenty of Australian companies have been effectively ripped off when tendering for a contract, no-one will speak up because they're scared of being blacklisted by the Defence Department.

"And let's face it, for some small manufacturers, and even some large manufacturers, the Defence Department is pretty much the only game in town."

Government 'committed to creating jobs'

Mr Klein said his company had run out of patience and was now taking the Commonwealth to court.

"Whilst the Government provides some incentives for the local defence industry, it does not appear to be translated into sales for the industry from the Defence Department, as they still prefer to buy offshore [in particular from the US]," he said.

Avner Klein has now taken the unusual step of going public with his frustrations. ( Supplied: Point Trading Group )

A spokesman for Defence Industry Minister Christopher Pyne rejected the suggestion.

"The Turnbull Government is committed to maximising Australian industry content in Defence contracts and creating Australian jobs," the spokesman said.

"Our naval shipbuilding program alone will create thousands of jobs around the country. We are already seeing a significant boost in the confidence in the local defence industry because of the Turnbull Government's $200 billion commitment to defence capability."

Point Trading Group's criticisms of Defence follow concerns from leading defence companies about Australia's recent decision to award a multi-billion-dollar missile contract without a full competitive evaluation process.