Jeremy Corbyn has used prime minister’s questions to put renewed focus on the failed plan to get a ferry company with no ships to provide emergency freight cover in the case of a no-deal Brexit, calling it “a symptom of the utter shambles of this government”.

The Labour leader used all his allocated questions to press Theresa May on how Seaborne Freight, a start-up firm, was allocated a contract for the task, and to condemn the transport secretary, Chris Grayling.

Pointing to Grayling’s troubled history in the job, Corbyn noted what he said were earlier failures in areas such as protecting airports from drones, giving contracts to the collapsed infrastructure firm Carillion, and the chaos over rail timetables and fares.

“And now the transport secretary is in charge of a major and vital aspect of Brexit planning,” Corbyn said. “How on earth can the prime minister say that she has confidence in the transport secretary?”

In response, May insisted it had been correct to allow Seaborne to take up a small part of the allocation for alternative ferry freight provision if a no-deal departure snagged up major routes, such as Dover to Calais, and accused Corbyn of seeking to ignore such contingency plans.

Calling the government’s wider handling of Brexit “costly, shambolic and deliberately evasive”, Corbyn asked why Grayling had told MPs the Seaborne contract had not cost taxpayers anything, when a National Audit Office report this week said £800,000 was spent on external consultants to scrutinise the plan.

“Will the prime minister use this opportunity to correct the record?” he said.

May insisted that “proper due diligence” was carried out on the Seaborne contract – prompting laugher from some MPs – but also on contracts with two other ferry providers, DFDS and Brittany, who were due to provide 90% of the service.

“That included a third-party assessment of the companies that were bidding for the contracts. There would have been a cost attached to this process regardless of who the contracts were entered into with,” May argued.

After the DfT awarded a £13.8m contract to Seaborne to operate freight ferries from Ramsgate to the Belgian port of Ostend in the event of a no-deal Brexit, it emerged the company had no ships and had seemingly borrowed the terms and conditions on its website from a food delivery business.

It has also since emerged that Thanet council, the Kent local authority that includes Ramsgate, has incurred £2m in costs seeking to prepare the port for possible ferry use.

Asked by Corbyn if the government planned to reimburse Thanet, May said only that officials were in discussions with the council. The Labour leader replied: “It cannot be right that a hard-pressed local council and local taxpayers are footing the bill for the incompetence of the secretary of state for transport and this government.”

He also pressed the prime minister on why the contract was awarded when the assessment of Seaborne’s bid said it was high risk, and whether proper scrutiny rules were followed.

It was announced at the weekend that the transport department had pulled the plug on the deal after Seaborne’s apparent financial backer, Ireland’s Arklow Shipping, decided it no longer wanted to be involved.

May replied: “What he appears to be suggesting is that the government should never look at start-up companies, should never look at the opportunities for new companies to be undertaking these. It is entirely right that the government ensured the majority of the contracts went to established companies.”

Corbyn had, May argued, “stood here time and time again” to argue against any spending on no-deal preparations.

The Seaborne contract was agreed “in order to be able to ensure that in a no-deal situation we are able to guarantee that medicines will be brought into this country”, the PM added.

Corbyn said the contract was so obviously flawed it should never have been agreed: “The spectacular failure of this contract is a symptom of the utter shambles of this government and its no-deal preparations.”