Project AIR 9000 Phase 8 is included in the Defence Capability Plan to provide naval warships with a new combat helicopter and the announcement puts to rest months of speculation over the course of the project.
"The Government has decided that the new helicopter will be either the Sikorsky-Lockheed Martin built MH-60R sourced through the US Navy, or the NATO Helicopter Industries NH90 NFH sourced through Australian Aerospace," Senator Faulkner said.
Senator Faulkner said that a competition would be held between the two helicopter options which would be cost-capped by the Defence Materiel Organisation through the tender process.
The procurement of the new naval combat helicopters as a matter of urgency was announced in the 2009 Defence White Paper.
Sufficient helicopters will be acquired to provide at least eight helicopters concurrently embarked on ships at sea, which under the White Paper requires a fleet of 24 helicopters.
"The competitive process will commence in the next few months with the Government making a final decision about the new helicopter in 2011," Senator Faulkner said.
"This schedule will enable the new helicopters to be delivered from 2014.
"Any decision Government makes in 2011 will take into account all relevant considerations including capability, cost, interoperability with other ADF capabilities, Australian industry opportunities, risk and value for money," Senator Faulkner said.
"The decision to progress the project via a competitive tender was consistent with the Kinnaird and Mortimer procurement reforms," Minister for Defence Personnel, Materiel and Science Greg Combet, said.
The tender will allow the companies to offer innovative solutions that satisfy the capability, cost and schedule requirements and detail what opportunities they will offer local industry.
"A competitive process will ensure value for money for the taxpayer and ensure the project's acquisition strategy provides the Government with the best possible information to support a decision for this vital capability," Mr Combet said.