The US defence ministry seeks to incentivise investment and boost industrial capacity by providing long-term certainty to suppliers.  

The Department of War (DoW) has signed a new agreement with Lockheed Martin to greatly expand PAC-3 MSE (Missile Segment Enhancement) production under a new framework acquisition model. 

Announced on 6 January by the DoW, this seven-year framework allows Lockheed Martin to increase production from 600 to 2,000 PAC-3 MSE missiles annually, providing the long-term certainty that industry says is often missing from defence ministries. 

Key subcontractors will also receive seven-year contracts, ensuring continued investment and commitment to grow production capacity. 

The DoW said the signing “establishes a transformative new acquisition model to expand munitions production and procurement”, with the department pursuing bolstered defence industrial capacity. 

It comes after years of high demand for the PAC-3, from the US and its allies, particularly amid the ongoing war in Ukraine. 

This makes it an ideal candidate for the new acquisition approach, as the DoW seeks to demonstrate the impact of clearer long-term demand signals on production. 

Delivery timelines will be a key metric for measuring the effectiveness of the strategy amid the rollout of longer-term contracts, with the DoW noting that there will be “strict delivery accountability” for both the department and Lockheed Martin. 

Going forward, one can expect “multiple munitions procurement contracts” to be executed under the reformed approach in 2026, it goes on to say. 

It is hoped that the larger, longer-term contract frameworks will help deliver economies of scale, following the release of the Acquisition Transformation Strategy in November.