Lockheed Martin and Defense Department Propel Groundbreaking Acquisition Strategy to Boost PAC-3® MSE Manufacturing

Lockheed Martin has officially entered into a groundbreaking framework agreement with the U.S. Department of War, aimed at significantly enhancing the production and delivery of PAC-3® Missile Segment Enhancement (MSE) interceptors. This innovative partnership is set to dramatically scale production from around 600 to 2,000 units annually over a period of seven years, bolstering U.S. forces along with various allied partners.

THE BIG PICTURE

• Acquisition Transformation: The agreement embodies a crucial aspect of the Department of War’s Acquisition Transformation Strategy—one of the most impactful reforms in U.S. defense procurement in decades. This new model introduces long-term demand certainty, encouraging industry investments, ramping up production rates, and enhancing operational efficiency. The collaborative financing approach underpins initial cash neutrality, empowering industries to confidently invest to meet essential production targets. The agreement is the result of years spent modernizing acquisition processes to deliver defense capabilities swiftly and efficiently amidst today’s security challenges.
• Timeline: The seven-year deal elevates the capacity for PAC-3 MSE production to approximately 2,000 units. Lockheed Martin is strategically positioned to meet these benchmarks, having already increased production by over 60% in the past two years. In 2025, they achieved a milestone by delivering 620 PAC-3 MSEs, which represents an increase of more than 20% compared to the previous year.
• Investing in the Future: Lockheed Martin is committed to making the necessary investments to facilitate this production increase. Both the Department of War and Lockheed Martin will share in the cost savings realized through the long-term demand certainty for PAC-3 MSE interceptors.

WHY IT MATTERS

In light of recent global operations, the demand for PAC-3 MSEs has surged. This agreement not only triples production capacity to satisfy the requirements of U.S. forces, allies, and partner nations but also aims to create thousands of new jobs across the American supply chain. Furthermore, the pact enhances the resilience of the U.S. defense industrial base by supporting long-term supplier investments and providing consistent demand signals for sustained production.

In 2025 alone, over 24,000 Missiles and Fire Control products were delivered to the U.S. and its allies, showcasing the ongoing commitment to defense readiness.

EXPERT PERSPECTIVE

Jim Taiclet, Lockheed Martin Chairman, President, and CEO, stated, “We value the Department of War’s leadership in advancing acquisition reform. This first-of-its-kind approach builds on years of advocacy and collaboration to integrate commercial practices in major acquisition programs. We will establish unprecedented capacity for PAC-3 MSE production, delivering promptly as required by our nation and allies, while providing significant value for taxpayers and shareholders.”

ADDITIONAL CONTEXT

• Lockheed Martin continues to collaborate with the U.S. government to secure an initial contract award, anticipated during the final fiscal year 2026 Congressional appropriations.