"There's no working together on LAND 400, and largely because of the way the procurement has been conducted by the Commonwealth. The states were essentially invited to compete and to treat with the bidders to try and attract them and that's led to a less than optimal economic outcome, in my opinion," said Combet.

"I've got a funny, I suppose, background for this because having been a Commonwealth government defence procurement minister, I know how inefficient it is to have the states competing in this way."

The former trade unionist has said the current process is beneficial to the federal government as it allows it to pass on the costs to the states.

"What it is is a cost transfer from the Commonwealth to the states. Instead of picking up any of the tab for the infrastructure, for example, Defence shifts all of that to the states who are out there competing amongst each other," Combet said.

"And the extent to which prime contractors then discount their tender price for the infrastructure that's laid on and the cash incentives that's laid on by the states, is moot, I think. And that's a less than optimal outcome for taxpayers."

Currently, South Australia, Victoria and Queensland are bidding for LAND 400 work that will see the construction of the next generation of Armoured Fighting Vehicles (AFV) and deliver replacements for the Australian Light Armoured Vehicle (ASLAV) and M113 Armoured Personnel Carrier (APC) fleets.