A federal government inquiry examining defence projects such as ships and submarines was told there were delays of up to six months in some areas after the virus first hit Australia in early 2020.

However, defence officials said the Delta variant outbreaks that forced several cities to be locked down this year would lead to even further delays later on.

Defence deputy secretary Tony Fraser told the inquiry that overseas supply chain issues and social distancing requirements were major factors in the delays.

"To build ships you build compartments, and as you build more it becomes more complex, and those compartments become physically limiting spaces," he said.

"The number of people that could be inside the compartments had to comply with the rules in place towards the middle of 2020, and that started to slow down production."

In its submission to the inquiry, the Australian National Audit Office said there had been a 21 per cent increase in the amount of time some of the major projects had fallen behind schedule, as of the end of the 2019/20 financial year.

Mr Fraser said the department was managing as best as it could under the COVID circumstances.

However, he noted the continuing Delta outbreaks would lead to further uncertainty.

"Some projects managed to continue safey, but we are seeing a growing risk," he said.

"We are seeing current increases in things like ship building, and we managing as best we can, but it is having some impact."

Defence also highlighted how COVID outbreaks overseas has led to delays in shipbuilding.

Outbreaks of the virus in Spain affected the output of shipbuilding yards in the country due to the restrictions in place.

Defence said while the impact of COVID was relatively mild in the most recent report, the next one would outline even further delays due to the pandemic.

Australian Associated Press