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The Department of War (DoW), working in partnership with Lockheed Martin, has announced a landmark framework agreement that aims to reshape how the United States fundamentally expands munitions production.

The seven-year framework establishes a new acquisition model designed to provide long-term demand certainty, incentivize private-sector investment, and sharply increase production capacity for critical weapons systems while reducing upfront government costs.

According to the announcement, the agreement is a plan to more than triple the annual production of the PAC-3 Missile Segment Enhancement (MSE) interceptor, a key component of U.S. and allied air and missile defense systems.

Production is expected to rise from roughly 600 missiles per year to approximately 2,000, aligning industrial output with projected long-term demand from U.S. forces as well as allies and partner nations.

The framework agreement is a direct outgrowth of the Department’s new Acquisition Transformation Strategy, unveiled by Secretary of War Pete Hegseth during his “Arsenal of Freedom” speech at Fort McNair in November 2025.

The strategy seeks to move away from short-term, fragmented procurement cycles toward larger, longer, and more predictable contracts that encourage companies to invest confidently in expanding production.

“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,” Hegseth said at the time.

Under the new model, the government reduces its reliance on direct facilitation and capacity investments, instead leveraging long-term contractual certainty to drive private investment across the defense industrial base.

Officials say the approach is intended to cut lead times, improve supply chain management, and rapidly rebuild stockpiles strained by years of high operational demand.

PAC-3 MSE Production Expansion

The PAC-3 MSE framework agreement establishes the basis for negotiating a seven-year supply contract, subject to Congressional authorization and appropriations. If finalized, the contract would lock in production at roughly 2,000 missiles annually, a significant increase aimed at strengthening U.S. air and missile defense readiness while supporting allied requirements.

The agreement aligns the interests of the government, taxpayers, and industry. Lockheed Martin will support the investments required to scale production, while benefiting from the certainty of sustained and growing demand.

In turn, the Department of War and Lockheed Martin will share in cost savings generated through higher volumes and efficiency gains tied to new equipment and streamlined processes.

“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,” he added.

Supply Chain and Facilitation Strategy

Department officials emphasized that expanding final assembly alone will not be sufficient. Supply chain facilitation is a central component of the agreement, reflecting lessons learned from recent production bottlenecks across the defense sector.

As part of the framework, the Department of War will work with key PAC-3 MSE suppliers to deliver seven-year subcontracts. These longer-term agreements are intended to give component manufacturers the confidence to invest in facilities, tooling, and workforce expansion, ensuring that production of critical subsystems keeps pace with the increased demand for all-up rounds.

Officials say the same facilitation strategy will be applied to multiple munitions procurement contracts over the coming year, pending Congressional appropriations.

The broader goal is to replenish depleted stockpiles, rebuild overall military readiness, reestablish credible deterrence, and strengthen the U.S. defense industrial base at scale.

Munitions Acceleration Council

The PAC-3 MSE agreement reflects the execution-focused work of the Department’s Munitions Acceleration Council, which was created to identify and remove structural barriers to scaling weapons production.

The Council’s mandate is to translate urgent operational requirements into long-term, executable industrial capacity rather than short-term surge solutions.

Department officials described the agreement as a practical demonstration of the new acquisition philosophy: rewarding companies that deliver on time, invest in capacity, and align with national security priorities, while moving away from slower, risk-averse procurement practices.

Contract Timing and Congressional Role

While the framework agreement has been reached in principle, the formal contract award is still forthcoming. Lockheed Martin has projected that an initial award could come as part of fiscal 2026 defense appropriations, underscoring the central role Congress will play in authorizing and funding the long-term supply contract.

The size of Lockheed Martin’s planned investment has not been disclosed. The company did not specify whether the expansion will involve hiring additional workers, building alternate production sites, or upgrading existing facilities, though officials confirmed that significant industrial scaling will be required to reach the targeted output.

The agreement comes amid a broader push by senior defense officials to overhaul the Pentagon’s acquisition apparatus and prioritize speed, scale, and reliability.

Speaking this week at HII’s Newport News Shipbuilding facility in Virginia, Secretary Hegseth reinforced the administration’s stance on industry accountability.

“We will give longer, larger, more predictable contracts to companies that deliver on time and on budget, companies that invest in their people, that invest in more capability and more capacity, not companies that invest in stock buybacks or CEO salaries or more dividends,” he said.

“For those who can’t adapt, who are too comfortable with the old slow ways of doing business, we wish them well in their other future endeavors, because we will find new partners who will adapt, who will invest, who will take care of their people, who will move at speed and at scale,” he added.

Lockheed Martin said in a statement that under the terms of the framework agreement, it “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.”