The federal government will turn to Spain or South Korea to build navy refuelling ships after a poor performance by Australian shipbuilders constructing new air warfare destroyers.

Defence Minister David Johnston has announced the tender process for the urgently needed replacements for HMAS Success and HMAS Sirius – but local shipbuilders won’t be able to bid.

Instead, the battle will be between Spain’s Navantia and South Korea’s Daewoo Shipbuilding and Marine Engineering.

Senator Johnston says the low productivity of domestic shipbuilders in the troubled air warfare destroyers (AWD) program means the government has to look elsewhere to get value for money.

“No responsible government could consider providing further work to an industry that is performing so poorly,” Senator Johnston said on Friday.

“This is not a blank cheque.”

The opposition concedes the AWD program has faced problems but claims paying foreign companies to build the replenishment vessels jeopardises the Australian industry.

Opposition Leader Bill Shorten accused the government of selling out the future of Australian jobs.

“There are thousands of shipbuilding jobs which have now got a question mark over their future,” Mr Shorten told reporters in Melbourne.

Senator Johnston said decisions about replacing navy ships should have been made by Labor years ago, in order to avoid the domestic industry “valley of death” – the gap between current and future projects when workers are laid off.

When asked if Labor should have replaced the supply ships, Mr Shorten accused the Abbott government of playing the blame game.

“If Labor was in power now we would be building these ships in Australia,” Mr Shorten said.

Opposition assistant defence spokesman Andrew Feeney denied the government has to look elsewhere for value.

“There has been challenges with that (AWD) program from the beginning,” he said.

“The point is those destroyers are being delivered, as far as we know, within the overall fiscal envelope.

“Those destroyers cannot be used as a justification for killing the industry.”

The government has warned the refuelling ships may not be the only projects to go overseas if local shipbuilders don’t lift their game.

They have a chance to improve performance when they build eight ships to replace the navy’s existing Australian-made Anzac frigates next decade for which the government has pledged $78.2 million for preliminary work.

Unions were quick to condemn the refuelling vessel decision, accusing the government of showing a lack of vision.

“Offshoring is an insidious move that undercuts the works of Australian shipbuilders,” AMWU national assistant secretary Glenn Thompson said in statement.

However, Mr Thompson was pleased that 20 new patrol boats would be built on home soil, which would lift the confidence in shipyards.

“If the government is aiming to create a shipbuilding industry that’s up to international benchmark standard, ensuring there is work is a good first step,” he said.

The $8.5 billion AWD project is now running almost two years late and costing $360 million more than planned, with shipbuilders performing well below international standards.

Prime contractor, the government-owned ASC, says it’s committed to demonstrating the Future Frigate program can be executed to the quality and cost customers expect.