Department of War Establishes New Acquisition Model to More than Triple PAC-3 MSE Production in Partnership With Lockheed Martin

The PAC-3 Missile Segment Enhancement (MSE) is the newest, most capable interceptor used in the Patriot air and missile defense system. It is a small, high‑speed “hit‑to‑kill” missile designed to destroy incoming ballistic and cruise missiles and aircraft by direct impact, rather than by a large explosive blast.

Key differences from earlier Patriot missiles:

• Role and guidance: Earlier Patriot versions like PAC‑2/GEM‑T use larger missiles with blast‑fragmentation warheads. PAC‑3 (and especially PAC‑3 MSE) uses hit‑to‑kill technology with many small attitude‑control rockets for very precise final guidance, giving higher lethality against ballistic missiles.
• Performance: PAC‑3 MSE has a larger dual‑pulse solid‑rocket motor and bigger tail fins than the earlier PAC‑3 CRI, giving greater speed, maneuverability and engagement range/altitude.
• Size and load‑out: PAC‑2 missiles are large (4 per launcher canister). PAC‑3 and PAC‑3 MSE are smaller; a Patriot M903 launcher can carry up to 16 PAC‑3 or 12 PAC‑3 MSE missiles, allowing many more interceptors per launcher.

So, compared with other Patriot missiles, PAC‑3 MSE is optimized to intercept the hardest, fastest threats at longer distances with more precision, while taking up less space per round on each launcher.

The Department of War’s Acquisition Transformation Strategy is a broad reform effort to speed up and scale how the U.S. buys weapons, especially munitions, by changing both internal processes and how it contracts with industry.

From Secretary Hegseth’s “Arsenal of Freedom” speech and the PAC‑3 MSE release, its main components include:

• Stabilizing demand: Give “bigger, longer contracts for proven systems” so companies see reliable multi‑year demand and can justify investing in new factories and equipment.
• New acquisition model: Replace short, fragmented buys with multi‑year framework agreements and portfolio‑level managers who can trade cost, schedule and performance to prioritize speed and volume.
• More commercial‑style buying: Accept an “85% solution” quickly and iterate, prioritize industry‑driven or commercial solutions, and increase competition and modular designs so parts can be swapped and upgraded faster.
• Empowered program leadership: Create Portfolio Acquisition Executives (PAEs) with clear authority and accountability for outcomes, less central bureaucracy, and embedded contracting officers judged on mission results, not paperwork.
• Regulatory streamlining: Remove or simplify burdensome FAR/DFARS rules, reporting and testing requirements that slow contracts.
• Joint requirements overhaul: Replace the old JCIDS requirements system with new boards (like the Requirements and Resourcing Alignment Board) that link military needs directly to funding and experimentation.

The PAC‑3 MSE framework agreement is described as the first concrete application of this strategy to munitions production.

In this context, a “framework agreement” is an overarching, multi‑year umbrella deal that sets the main terms (like target quantities, pricing approach, performance expectations and investment commitments) but is not itself the detailed purchase order for each batch of missiles.

How it differs from a traditional single procurement contract:

• Duration and scope: The PAC‑3 MSE framework runs for seven years and is intended to govern a series of follow‑on supply contracts, rather than one finite buy.
• Demand signal vs. specific orders: It establishes long‑term demand “from ~600 to 2,000 missiles per year” to justify factory and supplier investment, while specific annual quantities and funding still come through later contracts and appropriations.
• Collaborative financing: The agreement lays out how Lockheed Martin will invest in added capacity, with a mechanism for both sides to share in cost savings and enhanced profitability from higher volumes, something usually not spelled out in a standard fixed‑quantity contract.

In practice, the framework is a binding structure for a long relationship that guides multiple future contracts, rather than a one‑time, fully defined purchase.

“Eliminating government facilitization burdens” refers to reducing the need for the government to front the cost of building out industrial capacity—things like new production lines, tooling, test equipment or supplier plant upgrades—each time it wants more munitions.

In practice under this PAC‑3 MSE model:

• The Department of War provides long‑term, stable demand (a seven‑year, growing order profile) instead of large up‑front plant‑expansion money.
• Lockheed Martin and its suppliers are expected to fund most new facilities and equipment themselves, based on that demand certainty, with both sides sharing in any extra profitability and cost savings from higher volumes and new equipment.
• DoW still helps by coordinating seven‑year subcontracts with key suppliers so they too can justify capacity investments, but the goal is to avoid frequent, direct government “facilitization” contracts just to add production capacity.

So the burden shifts from episodic government‑paid factory upgrades toward industry‑financed expansion enabled by predictable multi‑year orders.

Public documents state only that production will rise from about 600 PAC‑3 MSE interceptors per year to about 2,000 per year over the seven‑year life of the framework agreement; they do not publish a year‑by‑year ramp.

Key points available:

• Current output: The Department of War release cites “approximately 600” per year; Lockheed Martin says it delivered 620 PAC‑3 MSEs in 2025 after a 60% increase over two years.
• Target capacity: Both DoW and Lockheed say the framework is designed to raise annual capacity to roughly 2,000 missiles within that seven‑year period.
• Start of new contract: Lockheed expects the initial, detailed supply contract under the framework to be awarded as part of final FY 2026 Congressional appropriations, so the full ramp would occur between about FY 2026 and FY 2032.

No more precise public schedule for when exactly output reaches 2,000 per year has been released.

The release and associated statements indicate that the PAC‑3 MSE ramp‑up will be funded through normal Department of War procurement budgets, not through a special one‑off program.

What is publicly known:

• The seven‑year supply contract that will sit under the framework is “subject to Congressional authorization and appropriations,” meaning annual funding must be provided in regular defense appropriations bills.
• Lockheed Martin says it is “working with the U.S. government toward an initial contract award, expected in final fiscal year 2026 Congressional appropriations,” implying the first major funding increment will be in the FY 2026 defense budget.
• The DoW release also notes that this facilitization strategy will be applied to “multiple munitions procurement contracts…pending Congressional appropriations,” signalling that the money will flow through standard munitions procurement accounts rather than a separate industrial‑base line.

Public sources do not yet specify the exact Army or joint budget line items or dollar amounts that will fund the triple‑capacity plan.

The framework agreement itself sets out roles and mechanisms rather than a final list of line‑item deliverables, but the releases describe several concrete responsibilities for Lockheed Martin:

• Production increase: Raise annual PAC‑3 MSE output from roughly 600 to about 2,000 missiles per year over the seven‑year period, including supporting U.S. forces, allies and partners.
• Capacity and investment: Finance and execute the necessary expansion of manufacturing capacity (new equipment, lines, workforce growth) at Lockheed and in its supply chain, using the long‑term demand signal and collaborative financing model described in the agreement.
• Delivery performance: Meet “strict delivery accountability” commitments—i.e., agreed schedules and quantities—with mechanisms for the company and DoW to share in additional profitability and cost savings when efficiencies are achieved.
• Supplier coordination: Work with DoW to put in place seven‑year subcontracts with key PAC‑3 MSE component suppliers, so that sub‑tier capacity and “all‑up‑round” (complete missile) output can rise in step with final‑assembly capacity.

Specific annual quantities, prices, and milestone deliverables will be defined later in the seven‑year supply contract(s) negotiated under this framework; those detailed terms have not yet been published.