The Department of War has announced a seven-year agreement with Lockheed Martin to more than triple production of PAC-3 missile interceptors.
The deal will boost annual output from 600 to 2,000 missiles.
The framework agreement represents a fundamental shift in military procurement, offering defense contractors long-term certainty in exchange for major production investments. It marks the first major implementation of Secretary Pete Hegseth’s acquisition transformation strategy, unveiled in November.
“We will stabilize demand signals. We will award companies bigger, longer contracts for proven systems so those companies will be confident in investing more to grow the industrial base that supplies our weapons systems more and faster,” Hegseth stated during his Arsenal of Freedom speech at Fort McNair.
Under the agreement, Lockheed Martin will shoulder production scaling costs while benefiting from guaranteed long-term demand. The company must meet strict delivery requirements and will share enhanced profits from efficiency gains with the government.
“This framework agreement marks a fundamental shift in how we rapidly expand munitions production and magazine depth, and how we collaborate with our industry partners,” said Michael Duffey, Under Secretary of War for Acquisition and Sustainment. “Lockheed Martin’s willingness to help pioneer this transformative acquisition model is a win-win for the taxpayer, our national security, and the rebuilding of the industrial base needed for the Arsenal of Freedom.”
The seven-year supply contract remains subject to Congressional authorization and appropriations. The Department plans to apply this model to multiple munitions contracts over the next year.
To ensure adequate component supply, the Department will facilitate seven-year subcontracts with key PAC-3 MSE suppliers. This approach addresses bottlenecks that have historically constrained missile production rates.
The agreement emerged from the Department’s Munitions Acceleration Council, created to eliminate barriers to weapons production scaling. The council translates operational demands into executable industrial capacity expansions.
The PAC-3 Missile Segment Enhancement serves as the primary interceptor for Patriot air defense systems. Growing demand from U.S. forces and allied nations has strained existing production capabilities.
This procurement strategy signals a broader shift in defense acquisition philosophy. Rather than funding capacity expansions directly, the government offers demand certainty to incentivize private investment.
