The US Department of Defense has signed one of the largest procurement contracts in its history with Lockheed Martin, agreeing to purchase Patriot interceptors in a deal worth $58.6 billion.
The contract is expected to dramatically increase the United States' interceptor inventory, which has been depleted by the wars involving Iran and Ukraine, as well as preparations for a possible future conflict with China.
The US has already delayed interceptor deliveries to Ukraine and postponed deliveries to Switzerland until 2032 in order to prioritize the protection of US forces in the Gulf and Gulf states that have purchased Patriot systems.
The multiyear contract governs an accelerated production schedule for the 2026-2032 period. Lockheed Martin currently manufactures about 600 interceptors annually, and the agreement is intended to raise production to 2,000 per year.
Achieving that target will require Lockheed Martin, along with suppliers of rocket motors, guidance systems, and warheads, to expand their production lines. The company has already announced plans to invest up to $9 billion in its manufacturing facilities in Alabama and Arkansas by 2030 and hire more than 1,000 additional employees.
Although the Pentagon did not disclose specific quantities in its announcement, the contract includes more than 10,000 interceptors and is also expected to reduce their high unit cost slightly, to at least $4 million each. By comparison, the comparable David's Sling interceptor produced by Israel's Rafael costs about $1 million per unit.
The pace of US defense production has declined significantly since the end of the Cold War, and the Pentagon has been pressing American defense companies to invest more heavily in expanding production capacity. The effort comes at the expense of share buyback programs designed to boost stock prices and generate stronger returns for investors, as well as executives whose compensation includes stock options.
Ukraine struggles to defend against Russian ballistic missile attacks
Ukraine is already struggling to defend itself against Russian ballistic missile attacks after the United States halted deliveries of Patriot interceptors because of the need to support the war with Iran. In another effort to ease the shortage, the Pentagon recently ordered older PAC-2 Patriot interceptors from Raytheon, the first such purchase in 30 years.
The $441 million deal will supply interceptors that were not designed to counter missiles but can intercept aircraft and drones. These interceptors are less expensive and faster to produce, and returning them to US inventories will help preserve the more advanced PAC-3 interceptors for defending against ballistic missiles.