The Federal Government has moved to fix the troubled $8.5 billion Air Warfare Destroyer project which is running more than two years late and as much as $600 million over budget.

Under a remediation plan unveiled on Tuesday, Melbourne shipbuilder BAE Systems and local subsidiaries of overseas defence contractors Navantia SA and Raytheon Australia will take on increased roles in the program.

Navantia, which designed the AWD, will contribute design skills, BAE will co-ordinate shipbuilding management while Raytheon will offer integration and contract management skills.

Their involvement is the first step of a three-part plan aimed at restoring the future of naval maritime capability in Australia.

Earlier in 2014 the government warned local shipbuilders future work would go offshore if they couldn’t lift their game.

It slapped AWD into its “projects of concern” shame file.

Finance Minister Mathias Cormann says the government is committed to ensuring the AWD project to construct three advanced warships in Adelaide was back on track.

He said the previous Labor government was told in June 2013 the program was nearly two years behind schedule and $360 million over budget.

That could actually be as high as three years and $600 million.

Two weeks ago, Defence Minister David Johnston underlined the government’s concern when he declared he wouldn’t trust government-owned shipbuilder ASC – the Adelaide-based lead partner in the AWD alliance – to build a canoe.

The plan also involves building a “sovereign industry around submarines”, focusing on avoiding a capability gap and developing an Australian industry around future frigates.

“We inherited a significant problem and we are now setting about the very difficult and complex task of putting in place a solution,” Senator Johnston said.

The minister declined to say whether the plan meant the navy’s next submarines would be built in Australia.

Treasurer Joe Hockey would not reveal what the latest plan would cost the budget when quizzed by reporters after the announcement.

AWD PROGRAM KEY FACTS

– Australia is building three advanced air warfare destroyers based on the Spanish Navantia F100 frigate.

– Project cost $8 billion

– It’s run by the AWD alliance of the Defence Materiel Organisation, ASC and Raytheon.

– Each vessel comprises 31 hull blocks, constructed at ASC in Adelaide, BAE in Melbourne, Forgacs in Newcastle and in Spain.

– They are being assembled at the ASC yard in Adelaide.

– Productivity has been far below the international benchmark of 60 man hours per, coming in at 150 man hours per tonne.

– AAP