WASHINGTON — The Defense Department and Lockheed Martin have cemented a deal to more than triple PAC-3 Missile Segment Enhancement production over seven years, with the company now aiming to increase production capacity to 2,000 a year by the end of 2030, according to its CEO.
Although a framework agreement has been reached in principle, the contract award is still forthcoming, with Lockheed projecting an initial award as part of fiscal 2026 defense appropriations.
The deal comes as the Defense Department seeks to overhaul its acquisition apparatus to prioritize speed and as top officials have promised industry steady demand signals — and bigger awards — if companies make deeper investments into developing new products and expanding infrastructure.
“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,” Defense Secretary Pete Hegseth said Monday during a speech at HII’s Newport News Shipbuilding in Virginia.
“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.
Under the terms of the agreement, Lockheed “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,” Lockheed said in a statement, using the administration’s preferred nomenclature for the Pentagon.
Lockheed CEO Jim Taiclet and Michael Duffey, the Pentagon’s top acquisition and sustainment official, declined to comment during a roundtable on the size of the investment due to the company’s upcoming earnings announcement later this month. But Taiclet noted that Lockheed could use its existing floor space, while adding additional workers, advanced tooling and automation to boost missile production.
“The ramp up to 2,000 will be accomplished by the end of 2030 which is literally three to four years away,” he said. “What we’re going to do to get there is going to be a full-court press across all the elements and inputs to production.”
The framework also includes provisions — which will be echoed in the final contract agreement — that account for inflation and stipulate that should the Pentagon or Congress shorten or adjust the terms of the deal, industry will be reimbursed for nonabsorbed, nonrecurring expenses that companies made in expectation of ramping production, Taiclet said.
“The NRE [nonrecurring engineering], we will be paying for it, but the cash flows will be timed in a way that our plan and our major suppliers’ plans for cash flows over the next few years will be neutralized. In other words, there will be no negative impact — is the goal — on any company that participates in this from a cash perspective in the current year or the coming years.”
The Pentagon will also work with key PAC-3 suppliers to cement seven-year subcontracts that will allow those companies to expand production facilities, the department said.
Taiclet added that Lockheed would diversify its supply chain by adding new suppliers and replacing poorly-performing vendors.
The Pentagon said in a statement that it plans to use the same facilitization strategy for multiple munitions procurement contracts over the next year “pending Congressional appropriations,” which would allow the department “to replenish our stockpiles, rebuild our military, reestablish deterrence and strengthen and grow our defense industrial base.”
Duffey added that the department is “aggressively” pursuing opportunities to form similar agreements with other companies, but said he could not provide a timeframe for when future agreements would be finalized.
But congressional approval of the agreement is not assured. In December, Sen. Chris Coons — the top Democrat on the Senate Appropriations defense subcommittee — told reporters that Deputy Defense Secretary Stephen Feinberg had briefed subcommittee leaders on a multi-billion-dollar munitions request that the department wanted to add late into the FY26 budget process.
“It reflects a lack of seriousness about the role of Congress in oversight and in funding,” Coons said then.
When asked about the outlook from Congress, Duffey confirmed that it would take additional funding in FY26 to enable the PAC-3 ramp-up and said the department had found “great receptivity” from Congress on the matter, while stopping short of stating that Congress will fund the deal.
“I’m confident there’s alignment conceptually,” he said. “Congress is working through their appropriations now, and we’ll see where that lands.”
Since Russia’s invasion of Ukraine in 2022, weapons makers have been racing to speed up weapons production, with Lockheed previously announcing plans to ramp annual PAC-3 production to 650 missiles. In 2025, the company delivered 620 missiles, a 20 percent increase over the previous year.
Tom Karako, a missile defense expert with the Center of Strategic and International Studies, said it was no surprise why the Pentagon prioritized PAC-3 for a munitions ramp up.
“The demand signal is massive among multiple US services, the other 17 nations globally that operate Patriot, and a handful more who want to. Moving from 600 to 2000 per year is by no means high or excessive relative to demand — it’s more likely a reflection of the limits of the possible,” he said.
Updated at 1/6/26 at 4:00 p.m. EST to include comments from Duffey and Taiclet.
