To combat China, Pentagon eyeing multi-year munition buys in FY24

WASHINGTON — Armed with new legal authorities to ramp up missile production and eyeing requirements for the Indo-Pacific theater, the US Navy and Air Force are seeking a range of multi-year munition production contracts in the Pentagon’s newest budget request.

This week Department of Defense officials revealed that their $842 billion discretionary budget request for fiscal 2024 includes five multi-year munition buys, a move traditionally reserved for larger ship and aircraft program contracts, a senior defense official told reporters on March 10. And if officials get their way, the number may expand to seven such multi-year deals for high-end munitions — with a new pilot program to drive down costs.

“Last year in the [FY23 defense] authorization bill, they gave us a new multi-year [authorities],” the senior defense official explained. “We’re trying to move out on those [and] so this is sort of the next step…of picking some of the ones that are most important to us and for our vision of what we need to move out on first.”

In total next year, the DoD is seeking $30.6 billion for munition production and more than $1 billion for the munition industrial base, according to budget slides.

“We assess what we need for ourselves for munitions routinely, we do it against the way in which we think about how we fight for the future, and against the real world demands that our combatant commands have [and] how they would operate,” Deputy Secretary of Defense Kathleen Hicks added today.

“And we’re focused…not just on what we may need today, for example, to support Ukraine…but looking ahead to the types of capabilities that we think are game changing for the future,” she later added.

Even with the new authorities, the Pentagon can’t just agree to a multi-year munition procurement effort if it’s over $500 million. For anything crossing that threshold, any multi-year buy has to be approved by congressional appropriators. The good news for DoD planners: Congress currently has munition stockpiles on the mind.

For more FY24 budget coverage, click here.

Concerns over weapon stockpiles emerged as a central focal point for US and other NATO members last year as the war inside Ukraine raged. Now entering its second year, all parties are looking for ways to shore up their respective industrial bases and refill their dwindling weapon arsenals.

“We still have much more to do. Even as we rush to support Ukraine in the critical months ahead, we must all replenish our stockpiles to strengthen our deterrence and defense for the long term,” Defense Secretary Llyod Austin warned on Feb. 15 following the NATO Defense Ministerial meeting in Brussels.

For DoD, this means looking to refill stockpiles of weapons have been useful in Ukraine while also trying to get ahead of a situation where the US military runs low of the kinds of weapons needed for a high-end conflict, especially one in the Indo-Pacific region.

Maj. Gen. Mike Greiner, the Air Force Deputy Assistant Secretary for Budget, spelled the thinking out to reporters on March 10, saying “So the munitions we have provided to Ukraine… they’re being replenished through [FY]23 supplemental dollars. So the focus in [FY]24 are those munitions we think we need for the highly contested pacing challenge, not to replace existing use.”

As a result, Pentagon planners are asking Congress to approve five multi-year buys over the $500 million threshold in FY24: Raytheon Technologies and Kongsberg Defence’s Naval Strike Missile; Raytheon’s RIM-174 Standard Extended Range Active Missile (ERAM), better known as the Standard Missile 6 (SM-6); Raytheon’s AIM-120 Advanced Medium-Range Air-to-Air Missile; Lockheed Martin’s Long Range Anti-Ship Missile (LRASM); and Lockheed Martin’s AGM-158B Joint Air-to-Surface Standoff Missile-Extended Range (JASSM-ER).

If lawmakers bless the multi-year deals and approve the funding, the Pentagon wants to spend real dollars on procuring those systems in FY24 and is seeking to buy:

• Naval Strike Missile: $249.9 million for 103 missiles
• Standard Missile 6: $1.6 billion for 125 missiles
• AIM-120: $1.2 billion for 831 missiles
• LRASM: $1 billion for 118 missiles
• JASSM-ER: $1.8 billion for 550 missiles

A New Pilot Program Takes Shape

Since Raytheon and Lockheed Martin produce all five of these weapons, DoD is seeking ways to maximize speed and cut costs through common parts or other efforts. As a result, the department will launch a pilot project under the “large lot procurement” umbrella.

“This is an idea that’s been brewing…for a couple of years [and it was] not invented because of Ukraine,” the senior defense official added. “[It’s a way] to try and arrange multi-year [buys] in a way that they reinforce each other so that we can get the most capacity we can out of the some of the things that…maybe share a lot of facilities and or components.”

At least two of the weapons discussed, JASSM-ER and LRASM, are produced in the same Lockheed factory in Troy, Ala. It’s not hard to imagine there being ways to make those production lines move more quickly through joint efforts.

Subsequent budget documents released today confirm that LRASM and JASSM-ER are both slated to take part in the pilot project, along with the SM-6 and AMRAAM, and the department plans to spend approximately $15.1 billion on the effort between FY24 and FY28. While the pilot project revolves around the multi-year deals, Pentagon documents note it also includes dollars to expand production capacity, increase annual production quantities, and provides 15 percent “economic order quantity” in FY24 for long-lead items.

The Pentagon’s decision to first focus on five multi-year munition buys for the Navy and Air Force seemingly highlights a focus on first stocking up on weapons that may be particularly useful in the Indo-Pacific region. But two of the Army’s ground-launched weapons programs are also in the pipeline the defense official said — one for Patriot Advanced Capability (PAC)-3 missiles, and the other for Guided Multiple Launch Rocket System (GMLRS).

Although both of these capabilities have been committed to the fight in Ukraine, the challenge is now ensuring that a production bump is not a temporary blip before industry starts investing in a ramp up and purchasing long-lead items. 

“Those are what I would call works in progress where we have our paperwork, or we have maybe part of our paperwork in front of [the Office of Management and Budget]. They’re not done and blessed and, in this budget, per se,” the senior defense official explained.

Part of the challenge is the “classic problem we face with industry” where the company boards want to see what’s in the five-year plan and have a contract in hand before committing to move forward.

“So, we’re looking to see if we can’t get there on those two things, as well but that will be an addendum and addition to the budget,” the official added.

“Those things are absolutely not done and baked,” that official added.

While the Biden administration and Lockheed sort through potential PAC-3 and GMLRS multi-year buy deals, for now the Army is requesting more than $1 billion for 5,064 GMLRS in FY24 (890 fewer than in FY23), $1.2 billion for 110 PAC-3 Missile Segment Enhancement (MSE) weapons and $36 million for Patriot missile modifications.

Undersecretary of the Army Gabe Camarillo today did not discuss the remaining sticking points associated with moving forward with PAC-3 and GMLRS multi-year contracts, but when it comes to the GMLRS, he said Lockheed is producing as many of those weapons as it can and is at “capacity.”

“They’re producing a certain quantity, which is the maximum they can produce,” he added. “We’re funding up to that quantity through a combination of either the supplemental and the base budget.”

Michael Marrow in Washington contributed to this report.