The Pentagon announced the first application of a new contract model for weapons system acquisitions, a seven-year agreement that will result in Lockheed Martin tripling annual production of the PAC-3 Missile Segment Enhancement interceptor. The PAC-3 MSE is a “hit-to-kill” anti-ballistic missile for the Patriot air defense system that extends the “range, altitude, and lethality” of the missiles, to neutralize threats from ballistic missiles, cruise missiles, and hypersonics with direct kinetic impact rather than blast fragmentation.
The U.S. Dept. of Defense claimed that “recent real-world operations” have amplified global demand for PAC-3 MSEs.
Lockheed will expand its production and increase output of the PAC-3 MSE missiles from approximately 600 to 2,000 per year, in line with long-term demand from U.S. and allied nations. Last year, Lockheed Martin delivered 620 PAC-3 MSEs, more than 20% above the 2024 total.
The PAC-3 MSE is assembled at Lockheed’s Camden, Ark., location, with some components produced at plants in Dallas and Lufkin, Tex. It is also developing production capability in a joint-venture effort with manufacturing partners in the Polish defense sector.
Neither the Pentagon nor Lockheed reported the value of the seven-year agreement, though available sources put the unit cost for each PAC-3 MSE missile at $7 million.
Under the Acquisition Transformation Strategy, introduced in November by Secretary of War Pete Hegseth, the Pentagon is assigning “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."
According to a joint statement, the new model establishes “a collaborative financing approach designed to preserve initial cash neutrality” that will allow Lockheed to invest confidently to meet required production levels.
