Faulty coffee mugs made to celebrate US president Barack Obama's Australia visit have been destroyed in a "mafia-style execution".

The Department of Parliamentary Services had 200 coffee mugs made to sell in the Parliament gift shop ahead of Mr Obama's planned visit two years ago.

But somehow the mugs were ordered with the president's first name wrongly spelled - with two Rs.

A total of 198 of them were subsequently destroyed, but not before a journalist could purchase two.

Bronwyn Graham from the Department of Parliamentary Services (DPS) used Estimates to explain to Labor Senator John Faulkner how and why the dud mugs were crushed.

"The mugs were destroyed into fragments," she said.

"They were then disposed of onsite into a planned concrete pour."

"They ended up in a concrete pour? That's got a touch of the Mafioso about it doesn't it Senator Hogg?" Senator Faulkner said.

"I wouldn't say that," president of the Senate, Senator John Hogg responded.

Ms Graham says the concrete pour now rests at Parliament.

"Senator, the sensitivity associated with the mistake that was made with the president's name - the last thing we wanted was for the fragments to be found on a garbage tip somewhere," she said.

Senator Faulkner asked if it is common practice for the DPS to have mugs produced for visitors.

"This particular idea was a new idea. A junior staff member came up with the idea," she said.

"I would say that the ordering - a breakdown in communication occurred - and the officer thought he had approval to go ahead and order the mugs, but he did not.

"I think it's fair to say given the error that was made, that no proofing was done."

Senator Faulkner said the "mafia-style execution" of the mugs into a concrete pour was "creative".

He said the two remaining mugs are "collectors items".