The South Australian Government has proposed privatising a submarine-building company in order to secure the local industry.

SA’s Defence Industries department said selling ASC – the government company that built the current Collins-class submarines – was “one option” to allow more military hardware to be produced in Australia.

The ASC has been contracted to build three new destroyers, but its likelihood of securing a new submarine contract is questionable.

The call comes amid concern that the nation’s military hardware-building could all be outsourced soon.

In its submission to the Commonwealth Defence White Paper, the SA Government said ASC could work better if it were split up and sold.

It floated the idea of making ASC into two companies - one that would build submarines while the other covers surface vessels.

South Australian Defence Industries Minister Martin Hamilton-Smith has made comment on the submission, saying he was "not fussed" about the ownership structures of a privatised shipbuilder, provided it "that we are building ships here," and that "the work, the opportunity and the enterprise, is all occurring in our own country," he said.

The call to do something to secure local military engineering services comes after indications from the Coalition that it could break a federal election promise and build the next fleet of submarines offshore.

Federal Defence Minister David Johnston has been arguing that there is a "time schedule" constraint, which means that if Australia does not have more subs soon, it would risk a "capability gap".