The Federal Government says Lockheed Martin’s $700 million submarine contract will create up to 200 jobs.

The Government has unveiled new details of the contract with the Australian arm of the US defence giant, which will see it designing systems to integrate torpedo capacity into the Navy’s new fleet of 12 submarines, set to start being built in 2022.

Much of the work on the $50 billion future submarines project will be completed by French company DCNS.

Part of the work involves removing the nuclear propulsion systems of the Barracuda class subs and replacing it with inferior diesel electric power.

Defence Industry Minister Christopher Pyne said the subs will feature “very potent, lethal and effective weaponry built around the Mark 48 torpedo and of course anti-submarine warfare”.

“Today marks a further step forward in our partnership with Lockheed Martin Australia in delivering a fleet of regionally superior submarines to Australia,” Mr Pyne said.

“This contract will cover work to 2022, including the design of the combat system and procurement activities to select subsystem and component suppliers.”

While DCNS initially claimed up to 90 per cent of the build will be carried out locally, Mr Pyne has revised down the figure to around 60 per cent.

“It's a substantial amount of money and that will trickle down ... to subcontractors and suppliers across Australia as well as to Lockheed Martin,” he said.

“It's 200 jobs at Lockheed Martin Australia alone — about 195 of those here in Adelaide and five of those in Canberra as part of the management.”

Lockheed Martin Australia chief Vince Di Pietro said the jobs should be advertised “by the end of this year”.

Despite recent warnings of cost blowouts and delays, Mr Pyne says the program “remains on time and on budget”.