The top civil servant from Chris Grayling’s department has admitted the government did not have a written guarantee of secure financial backing before handing a £13.8m contract to a ferry company with no ships.

Bernadette Kelly, the Department for Transport’s permanent secretary, told the public accounts committee that instead officials accepted verbal guarantees from Seaborne Freight and were reassured that the firm was a “known quantity in the industry”.

The DfT scrapped its contract with Seaborne, a startup company, last week after its apparent financial backer, the Irish firm Arklow Shipping, withdrew its support.

Sources at Arklow told the Guardian this week that the firm had been in talks with Seaborne Freight twice last year but “never had any agreement” with either Seaborne or the Department for Transport to run a ferry service between Ramsgate and Ostend.

Grayling is facing demands to resign as transport secretary after his department ignored warnings from experts that the endeavour entailed “significant risks”.

A review by the National Audit Office, the public spending watchdog, found that the DfT received three bids for the ferry contracts, and that two of the three operators that won contracts did not meet the department’s own criteria.

Kelly told MPs the DfT awarded Seaborne one of three contracts before Arklow initially confirmed its backing in a letter on 15 January.

She said the department received “intimations” from Seaborne. “So you took the word of Seaborne?” asked the committee’s chair, Meg Hillier. “I would need to check what precise pieces of paper were in play at that point,” Kelly said.

The department’s director general for international security and environment, Lucy Chadwick, told the committee: “We certainly had a number of discussions with Seaborne in term of who their backers were.”

Kelly said the firm’s proposed arrangements, which involved leasing two ferries that it would then operate, were “not in any way abnormal or remarkable”.

Earlier on Wednesday during prime minister’s questions, Jeremy Corbyn pressed Theresa May over the failed plan.

Pointing to Grayling’s already troubled history in the job, the Labour leader said: “And now the transport secretary is in charge of a major and vital aspect of Brexit planning, how on earth can the prime minister say that she has confidence in the transport secretary?”

May said it had been correct to allow Seaborne to take up a small part of the allocation for alternative ferry freight provision.

Corbyn said the government’s wider handling of Brexit had been “costly, shambolic and deliberately evasive”, and he asked why Grayling had told MPs the Seaborne contract had cost taxpayers nothing, 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 asked.

May said “proper due diligence” was carried out on the Seaborne contract and 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.

Corbyn also pressed May on whether Thanet, the Kent council responsible for Ramsgate, would be reimbursed for £2m in costs linked to trying to prepare the port, which has not had a ferry service for six years, for potential use.

Kelly told the committee that some dredging had been completed at Ramsgate. She left open the possibility that it could yet be used for ferries in a no-deal scenario. “We may yet conclude that we might yet consider investment in that port,” she said.

A DfT spokesperson said: “We have procured a number of routes to ensure resilience through our contracts with DFDS and Brittany Ferries. These routes will be used for priority goods, including medicines.

“We are continuing to work with key sectors to understand their capacity needs and ensure that supplies of priority goods continue in any scenario.

“We will continue to explore all possible options to secure additional freight capacity to ease pressure on the Dover straits in the event of a no deal Brexit, including through the port of Ramsgate.”