US defence contractor Lockheed Martin will supply the combat systems for Australia's new fleet of 12 French submarines, Defence Industry Minister Christopher Pyne said Friday.

The Australian arm of the American defence giant defeated US rival Raytheon in a deal to fit out the Aus$50 billion (US$38 billion) vessels.

"Lockheed Martin have won the tender for the combat system integrator role with the submarines," Pyne told reporters, adding that it was worth Aus$1.4 billion dollars.

Australia awarded French contractor DCNS the main contract last April to design and build its next generation of submarines.

The vessels will be a scaled-down, conventionally powered version of France's 4,700-tonne nuclear-fuelled Barracuda.

Australia had also now agreed with DCNS to launch design and mobilisation work with a team heading to Cherbourg, France, while DNCS will boost its presence in Adelaide where the subs will be built.

"It's new jobs for Australians and new investment in our state," Pyne said. "Infrastructure will start being built in 2017."

Pyne said the Lockheed Martin contract will ensure around 200 skilled Australian jobs during the design and build phases while a total of 2,800 jobs will be linked to the overall Shortfin Barracuda programme.

Defence Minister Marise Payne released a statement saying: "By partnering with an Australian-based company with strong links to the US, we will ensure that we get the best Australian and US technology, while ensuring that our sensitive technology is protected."

DCNS last month suffered a major leak of secret data on its Scorpene subs supplied to the Indian navy.

But Pyne rebuffed concerns telling reporters: "We are absolutely comfortable around the security of our plans, designs and the build."

"We've made it very clear... certainly from the department of defence to the French government, that the very strict security arrangements we have over the Collins class submarines that satisfy both us and the United States will be in place for the Australian-designed new submarines."

The Barracudas are to replace Australia's ageing diesel and electric-powered Collins submarines.

France's Minister of Defence, Jean-Yves Le Drian, and the boss of DCNS both welcomed the decision.

Herve Guillou, DCNS chief executive, said: "DCNS is looking forward to a strategic and sustainable partnership with the Commonwealth of Australia, Lockheed Martin and Australian industry."

He added: "DCNS is committed to ensuring that Australia has a regionally superior submarine constructed in Adelaide and develops a sovereign naval industry."

bp/mfc/ds

LOCKHEED MARTIN

RAYTHEON