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. 

As part of this, subcontractors involved in PAC-3 MSE manufacture 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. 

This follows complaints in January from US President Donald Trump that companies must prioritise expanding production capacity, rather than issuing large dividend payouts. 

In particular, production capacity for munitions, such as the PAC-3, have been in high demand since the war in Ukraine. This makes it an ideal candidate for the new multi-year framework-based acquisition approach, as the DoW aims to prove the efficacy of clearer long-term demand signals on production. 

Delivery timelines for contracts awarded under this multi-year framework strategy will be a key metric for measuring its effectiveness, with the DoW noting that there will be “strict delivery accountability” for both the department and Lockheed Martin. 

Going forward, the sector can expect “multiple munitions procurement contracts” to be executed under this new acquisition approach in 2026, the DoW said. 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.