Nick Xenophon says Australian soldiers will soon be decked out in the cheapest dress uniforms China can make.

A $9 million contract awarded to Australian Defence Apparel (ADA) to produce “non combat clothing” allows it to use “established sub-contractor arrangements” overseas.

“Australian Defence Apparel was selected as the preferred tenderer, following an open competitive process,” Defence said in a statement.

South Australian Senator Nick Xenophon has opened fire on the decision.

“If something is a little more expensive on the surface here in Australia but it means we're going to get all sorts of flow on benefits in terms of jobs, in terms of economic activity and tax and other benefits then it's a no-brainer,” he told the ABC.

“Surely something as iconic as the uniforms our serving men and women of the Defence Force wear ought to be made in Australia.

“The fact that it's not is nothing short of a disgrace.”

Senator Xenophon has called for a detailed explanation from Defence Minister Marise Payne.