Raising provocative questions that will likely spark fresh debate about the Abbott government’s commitment to local manufacturing, the paper issued by the Defence Department asks Australians to consider whether the higher cost of building submarines at home is justified by the work it would create for the local shipbuilding industry.

“There is significant debate emerging about the future submarine and whether it should be built in Australia. This debate must consider the cost, risk and schedule as well as the benefits of the different options,” the paper stated.

The massive project to replace the Collins class fleet of boats will be Australia’s largest-ever military purchase, reaching tens of billions of dollars. The cost would likely be reduced significantly if the government opted for an off-the-shelf foreign design and had the boats built overseas, although this would mean the death of naval shipbuilding in Australia.

Having the submarines built overseas would also have strategic consequences, experts say, because Australia would give up some control over what is regarded as a country’s single most important military hardware asset.

The Defence Issues Paper 2014, set to be released on Tuesday, is the government’s guiding document for the public consultation process over next year’s Defence White Paper, which will set the direction for Australia’s military priorities for at least the next decade.

Defence Minister David Johnston said recently the government wanted to support local naval shipbuilding, which employs more than 4000 people, but not at any cost. He has pointed to inefficiencies, delays and cost overruns in major projects such as the Air Warfare Destroyer to put the industry on notice that it must lift its game to continue to win government work.

It has widely been assumed in defence circles that for both political and strategic reasons, the government would eventually come down on the side of building the submarines in Adelaide’s shipyards, but the tone of the new discussion paper suggests this is now an open question.

The paper goes on to point out that every additional dollar the government spends propping up local industry is a dollar that cannot be spent on other much-needed military hardware.

“The opportunity cost needs to be considered,” it stated. “What other military capability might be forgone if monies are committed to industries that do not meet international benchmarks?”

The industry is already complaining of a looming “valley of death” as work on existing projects dries up without new contracts to replace it.

Labor and unions are likely to seize on the discussion paper as further ammunition in their assault on the government over its commitment to shipbuilding.