Defence officials say it is investigating complaints raised in an internal memo about contractors on the project, which is expected to deliver 12 submarines over several decades as the nation's largest military procurement program.

The memo said contractors had signed contracts on behalf of the department's science and technology group, and paid invoices without apparent oversight by Defence staff, among several other complaints.

Associate secretary Rebecca Skinner told a Senate estimates hearing on Tuesday the group, following the claims, made changes requiring that only public servants sign contracts.

Defence's fraud and audit staff began investigating the allegations in the internal memo, prepared in March, about "probity and apparent nepotism issues" on the future submarines project after it received a media query about the claims.

Labor senator Kim Carr told Ms Skinner he would be troubled that contractors could sign contracts on behalf of Defence under any circumstances.

"I would've thought the answer you would be able to provide me today was 'under no circumstances could this happen'," he said.

Ms Skinner said there were some purposes, and limited situations, when contractors did have authority to engage other contractors on Defence projects, but said it was uncommon.

"That's why we've ensured there are new measures in place to make sure that cannot happen," she said.

"We are doing a review. Should there be matters that come out of that review that would indicate there has been a fraud or some other activity, then there'll be appropriate sanctions and appropriate referrals to other people."

Defence secretary Greg Moriarty said he would wait for the outcome of the investigation before commenting.

"There's a number of things here I agree strike me as very unusual to say the least, but I want to get to the bottom of the matter," he said.

Mr Moriarty could not say the number of contracts signed by contractors on Defence's behalf, but said he understood there were "very limited circumstances where that may have taken place".

He said both Defence Minister Marise Payne and Defence Industry Minister Christopher Pyne told him they expected "remedial action" addressing the complaints.

Senator Payne told Senator Carr she became aware that contractors were allegedly signing contracts on the submarine program "in the course of events" after a media query sent to Defence. She said the alleged actions were "unacceptable".

"I've made that view clearly to the secretary and the senior departmental officials in relation to that," she said.

Staff at Defence's science and technology group, which has been tasked with researching designs needed for components of Australia’s new fleet of submarines, raised the complaints about contractor behaviour in the memo.

The contracting arm of the Defence Department’s non materiel procurement branch had also raised concerns about contractors on the project, called SEA1000, the internal memo said.

“Obtaining accurate information in relation to SEA1000 contracting has been difficult for a number of years, primarily as a result of an unwillingness to provide clear responses on contractual arrangements,” it said.

Defence science and technology officials in the memo complained that contractors had appeared to try hiding labour hire workers by registering them as “service providers”, who are paid differently.

They also said contractors had engaged other contractors using purchasing orders designed for buying simple items, and without oversight by Defence Department public servants.