The Department of War (DoW), working in partnership with Lockheed Martin, today announced the signing of a landmark framework agreement that establishes a transformative new acquisition model to expand munitions production and procurement—one that delivers long-term demand certainty, incentivizing industrial investment to increase production, cut lead times, drive supply chain management efficiencies, while reducing upfront government facilitization and capacity investments.
This seven-year framework agreement with Lockheed Martin is a direct outcome of the Department's new Acquisition Transformation Strategy, as unveiled by Secretary of War Pete Hegseth in his Arsenal of Freedom speech at Fort McNair in November. As the Secretary stated, "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."
Under the framework agreement, Lockheed Martin will increase annual production of the PAC-3 Missile Segment Enhancement (MSE) interceptor from approximately 600 to 2,000, aligning industrial capacity to the long-term demand required by U.S. forces, allies and partner nations. The agreement also aligns the interests of Lockheed Martin, the government, and taxpayers, with Lockheed Martin supporting investments to scale the required production increases, while benefitting from the certainty of long-term, growing demand for the PAC-3 MSE.
"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 framework agreement establishes the basis for negotiating a seven-year supply contract, subject to Congressional authorization and appropriations, that would increase PAC-3 MSE production to approximately 2,000 missiles per year, up from approximately 600 today. The agreement also provides for strict delivery accountability and allows both the Department of War and Lockheed Martin to share in any enhanced profitability resulting from new equipment and volume efficiencies. This facilitization strategy will be applied to multiple munitions procurement contracts over the next year, pending Congressional appropriations, to replenish our stockpiles, rebuild our military, reestablish deterrence and strengthen and grow our defense industrial base.
The Department of War recognizes that supply chain facilitization is also required to support production capacity increases. As part of the framework agreement, the DoW will work with key suppliers of PAC-3 MSE to deliver seven-year subcontracts to ensure facilitization investments and the production capacity of components also expand to meet the increased demand for all-up-rounds.
The PAC-3 MSE framework agreement advances the Department's acquisition transformation priorities and reflects the execution-focused work of the Department's Munitions Acceleration Council, as well as the strong partnership with Lockheed Martin. The Council was established to rapidly identify and remove structural barriers to scaling weapons production and to translate urgent operational demand into executable, long-term industrial capacity.
