A bid from a Port Adelaide company for the contract to build new patrol boats for Pacific nations has been rejected as unsuitable by the Federal Government.

Adelaide Ship Construction International (ASCI) lodged its bid last January with the Defence Department to construct vessels for countries including Fiji, Tonga and Papua New Guinea.

The patrol boats would account for $594 million of a Defence contract valued at more than $1 billion.

Defence Minister Marise Payne said three bids submitted under a competitive tender process had been deemed "irrevocably non-compliant".

But she said the Federal Government remained committed to constructing the new Pacific patrol boats in Australia.

The Port Adelaide company had hoped to put on dozens more workers if it secured the deal.

South Australia's Defence Industries Minister Martin Hamilton-Smith said the knockback was a huge blow for the local company and for the future of the state's defence construction industry.

"It's a really worrying signal from the new Federal Government under Prime Minister Turnbull and Defence Minister Marise Payne because it's the first decision on shipbuilding jobs since the new regime was in place and it's denied South Australia the opportunity for those jobs," he said.

"This is very disappointing news for ASCI who were hoping to win this patrol boat build. It would have created dozens and dozens and dozens of jobs over many years building quite a few patrol boats for our neighbours in the Pacific.

"This was a very, very big contract for the company."

Mr Hamilton-Smith said the news came at a time when another Adelaide shipbuilding firm, ASC, was laying off jobs.

"It means there's nowhere for those workers to go," he said.

The current fleet of 22 Pacific patrol boats is spread across 12 nations.

Defence said the aim of the patrol boat program was to help Australia's Pacific neighbours "independently patrol and protect their exclusive economic zones".