The federal government has eliminated the two cheapest options to deliver Australia's 12 new submarines, a project likely to be the biggest in Australia's history.
An off-the-shelf (MOTS) model of submarine similar to those operating overseas can't meet requirements for long range and endurance, even if fitted with Australia-specific systems.
So the government's now pursuing the final options - an all-new design or an evolution of the existing Collins-class submarines, according to the 2013 Defence White Paper.
"We have before us the largest single capital works program or project the commonwealth has seen," Defence Minister Stephen Smith told reporters on Friday.
"We have learned some painful lessons from the maintenance and sustainment of the Collins."
Australia recently secured an agreement with Sweden to gain access to the intellectual property of the Collins boats, which were developed from a design by Swedish firm Kockums.
It also decided on a combat system for the new submarines based on an evolution of the US system now used on the existing six Collins boats.
No final cost for the 12 submarines is yet available but analysts put it as high as $40 billion for an all-new design, or as low as $10 billion for boats based on an existing European design.
While the 2009 white paper left open the possibility of building a fourth air warfare destroyer (AWD), the government has now concluded on defence advice there's no need for another.
To share the existing work around, the AWD Alliance of shipbuilders will reallocate the construction of four AWD hull blocks for the third vessel from Forgacs shipyard in Newcastle to BAE Systems' yard in Melbourne.
Mr Smith confirmed the government was committed to the Lockheed Martin F-35 Joint Strike Fighter (JSF) under the current timetable, with the first of three squadrons to enter service from 2020.
He said the troubled JSF project had greatly improved.
"But there are still risks associated with that and we are not prepared to take the risk of a gap in our combat capability," Mr Smith said.
So the white paper proposes Australia acquire another 12 Super Hornets fitted with advanced Growler electronic warfare technology.
This will give the RAAF a mixed combat fleet of 36 Super Hornets and 71 older F/A-18 classic Hornets, until the fighters arrive.
Defence Company Lockheed Martin says the government is showing confidence in its F-35 aircraft program.
"Along with the first two Australian jets in production, which (we) will deliver in mid-2014, we will work closely with the government to support their purchase of their remaining 100 F-35 aircraft," it said in a statement.
"Additionally, we will work with Australian industry supporting their participation in the production of components and sub-assemblies for the more than 3000 F-35s to be built during the life of the program."
The company said the projected $5.5 billion of Australian industrial participation in the F-35 program would deliver economic benefits to Australia for decades.