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Lockheed Martin to increase PAC-3 MSE Production

Lockheed Martin signed a landmark framework agreement with the U.S. Department of War to rapidly accelerate the production and delivery of PAC-3 Missile Segment Enhancement (MSE) interceptors. This transformative partnership, designed to deliver sustained production at scale, will increase annual capacity from approximately 600 to 2,000 in a seven-year agreement, supporting US forces, allies and partner nations.

This seven-year framework agreement 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.” 

“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, in a US Department news release. “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 Big Picture

• Acquisition Transformation: This agreement is a direct outcome of the Department of War’s Acquisition Transformation Strategy, one of the most significant reforms to U.S. warfighting acquisition in decades. The framework introduces a new model that provides long-term demand certainty, enabling industry investment, increasing production rates and driving operational efficiencies. It incorporates a collaborative financing approach designed to preserve initial cash neutrality, allowing industry to invest confidently to meet required production levels. The agreement reflects years of collaboration to modernize acquisition and deliver critical capability at the speed and scale required by Jan. 6, 2026’s security environment.
• Timeline: The seven-year agreement increases capacity for PAC-3 MSE to approximately 2,000. Lockheed Martin is well-positioned to fulfill this agreement, having recently increased PAC-3 MSE production by more than 60% over the past two years. In 2025, Lockheed Martin delivered 620 PAC-3 MSEs, exceeding the previous year by more than 20%.
• Investing for the future: Lockheed Martin will support necessary investments to drive the production increase, and both the Department of War and Lockheed Martin will participate in the cost savings opportunity enabled by long-term demand certainty for PAC-3 MSE interceptors.

Tripling production capacity

Following recent real-world operations, global demand for PAC-3 MSEs continues to soar. This agreement will more than triple production capacity to meet the needs of U.S. forces, allies and partner nations. As a result, the PAC-3 program will add thousands of additional American jobs across the supply chain. Beyond increased output, the agreement strengthens the resilience and anti-fragility of the U.S. defense industrial base by enabling long-term supplier investment, predictable demand signals and sustained production.

In 2025 alone, more than 24,000 Missiles and Fire Control products were delivered to America and its allies.

“We appreciate the Department of War’s leadership in advancing acquisition reform,” said Lockheed Martin Chairman, President and CEO Jim Taiclet, in a company news release. “This first-of-its-kind approach builds on years of advocacy and collaboration to bring commercial practices to major acquisition programs. We will create unprecedented capacity for PAC-3 MSE production, delivering at the speed our nation and allies demand while providing value for taxpayers and our shareholders.”

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. 

Photo credit: Lockheed Martin