Nearly 60 Abrams battle tanks purchased from the US could have been lost at sea without compensation after it was revealed the $500 million contract did not include marine insurance.

The Defence Material Organisation (DMO), heavily criticised in the past for cost blowouts and project over-runs, has been generally praised for the way in which its order for 59 refurbished tanks for the Royal Australian Army was handled.

But while the Australian National Audit Office praised the DMO for keeping the project on time, on budget and delivering the tanks with the "required quality", the lack of insurance cover for the transport of the tanks from the US to Australia was highlighted as a major blemish.

"The DMO did not fully analyse and document the risks associated with moving the tanks to Australia using commercial sea transport," an audit report said.

"A developed risk analysis of the commercial delivery of the first tanks, had it been undertaken, could have included consideration of utilising a costed insurance quote in the event of loss of the shipment at sea."

Insurance cover had apparently been suggested, but the DMO decided against it because the "low probability of loss did not justify the costs".