Lockheed Martin has signed a new agreement with the US Department of Defense (DoD) that will dramatically accelerate production of the PAC‑3 Missile Segment Enhancement (MSE), one of the world’s most advanced air‑and‑missile defense interceptors.
A sweeping seven‑year framework agreement reached aims to boost annual output from roughly 600 interceptors to as many as 2,000, marking one of the most significant expansions of US missile manufacturing in decades.
The deal comes as countries around the world have increased their defense budgets and are going on spending sprees to modernize their militaries in response to ongoing geopolitical uncertainties.
A new model for defense procurement
The deal is the first major initiative under the DoD’s new Acquisition Transformation Strategy, an overhaul intended to modernize how the United States procures critical defense capabilities. The strategy introduces long‑term demand commitments, as well as new financing mechanisms designed to give industry the confidence to invest in expanded production.
Lockheed Martin Chairman, President and CEO Jim Taiclet praised the DoD’s new acquisition approach, calling it “first‑of‑its‑kind.”
"This first-of-its-kind approach builds on years of advocacy and collaboration to bring commercial practices to major acquisition programs,” he said.
“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,” Taiclet added.
Under the agreement, Lockheed Martin will make substantial investments to scale up production, while the DoD will share in cost‑savings generated by the long‑term procurement model.
Lockheed Martin has already increased PAC‑3 MSE output by more than 60% over the past two years, delivering 620 interceptors in 2025, about a 20% increase over 2024.
Officials say the new framework is designed to ensure the United States and its allies can meet rapidly rising global demand for advanced missile defense systems. The PAC‑3 MSE is a key component of the Patriot air‑defense system, used by the US and numerous partner nations.
What is the Patriot?
With its ability to intercept ballistic, cruise, hypersonic, and other airborne threats, the Patriot system is a cornerstone of the defense strategies of the United States and 17 partner nations. It is among the most sophisticated air defense units supplied by the West to Ukraine as it continues to fight Russia's invasion. It could also be employed in US President Donald Trump's Golden Dome missile defense shield.
PAC-3 MSE defends against incoming threats through direct body-to-body contact delivering exponentially more kinetic energy on the target than can be achieved with blast fragmentation mechanisms. The highly agile Patriot Advanced Capability-3 Missile Segment Enhancement (PAC-3 MSE) interceptors produced under the contract would go to the US Army and a handful of US allies.
The surge in production comes amid heightened global security concerns and increased operational use of missile defense systems. Demand for PAC‑3 MSE interceptors has grown sharply following recent conflicts and real‑world engagements in multiple regions.
For allies, expanded US production capacity is expected to strengthen supply reliability and long‑term sustainment. While Israel used to have Patriot systems as part of its layered air‑defense systems, it transferred eight M901 PAC-2 batteries to Ukraine.
Beyond meeting military needs, Lockheed Martin says the agreement will support thousands of new jobs across the American defense industrial base and help stabilize supply chains strained by years of surging demand.
In 2025 alone, the company delivered more than 24,000 Missiles and Fire Control products to the US and allied nations.