Australia's government-owned shipbuilder says it could construct a new fleet of submarines in South Australia for less than $24 billion, making it competitive with rival overseas bidders.

Complicating the task of foreign shipbuilders who are pitching for the business, the interim head of Adelaide-based ASC told a Senate estimates hearing on Thursday morning that the firm believed it could build 12 new submarines for between $18 billion and $24 billion. Estimates for the cost of the government's favoured overseas option are between $20 and $30 billion.

HMAS Collins, an Australian-built Collins-class submarine. Credit:Damian Pawlenko

The Abbott government has repeatedly implied that it is considering outsourcing overseas the manufacture of a replacement fleet for the ageing Collins Class submarines, despite a pre-election promise by Defence Minister David Johnston to build them in Australia.

This is partly for cost reasons, though Senator Johnston has also said he is concerned that building them locally would take longer and open up a disastrous "capability gap" in which the new boats are not ready by the time the Collins is due to be retired.