Pentagon expands missile production with prices not yet set

(The Center Square) – The Department of War signed agreements Monday with Northrop Grumman to help triple production of PAC-3 interceptors and quadruple output of THAAD components, the latest move in the administration's push to expand the nation's missile-defense arsenal.

The department cast the deals as part of its Acquisition Transformation Strategy, a push to hand suppliers longer-term demand so they will fund the tooling, facilities and workforce needed to scale up interceptor production.

Northrop Grumman valued its two agreements at a combined $3 billion, covering solid rocket motors, ignition safety devices and structural components. The work supports two much larger Lockheed Martin prime contracts awarded in recent weeks: a PAC-3 interceptor contract that reached $58.62 billion in total value after a $53.86 billion modification on July 29 and a $35.3 billion THAAD contract on June 24.

The agreements come as the administration seeks the largest military budget in U.S. history, a $1.5 trillion request for fiscal 2027 that would be a 42% increase, including $756.8 billion for defense industrial base investments to expand production capacity and supply chains.

Northrop Grumman said the deals support an increase in PAC-3 production from about 600 interceptors a year toward the thousands. The company said it expects a fourfold rise in THAAD component output. The PAC-3 agreement adds a second supplier of solid rocket motors, which the department said would reduce reliance on a single source.

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The headline figures, however, are ceilings rather than committed spending. Both Lockheed Martin contracts are undefinitized, meaning the government has authorized work before agreeing on a final price. The department obligated about $843 million on the THAAD contract when it was awarded in June, but obligated no money on the $53.86 billion PAC-3 modification when it was signed July 29, according to the contract announcements.

The Army Contracting Command, which awarded the PAC-3 modification, and the Missile Defense Agency, which awarded the THAAD contract, did not respond to questions about when the contracts would be finalized.

The Department of War did not answer questions about whether Northrop Grumman's $3 billion is separate from or included within the Lockheed Martin contract values. A Pentagon official said the approach was designed for speed.

"By leveraging Undefinitized Contract Actions, we're getting private industry to invest upfront – cutting through red tape to deliver to our Warfighters at the speed of relevance," the official said, adding that the department had spent the past year "laying the groundwork and establishing key partnerships to expand munitions production."

When the final prices will be set is not yet clear. Under federal contracting rules, undefinitized deals of this size must be settled within months of the contractor submitting a qualifying proposal, a step neither the department nor Lockheed Martin has said has occurred.