In a reversal of its original plans, the US Department of Defense’s Missile Defense Agency (MDA) has extended the life of the Standard Missile-3 (SM-3) Block 1B program by at least one additional year. On Friday, May 16, they awarded Raytheon a $1 billion ceiling Undefinitized Contract Action (UCA) for “a quantity up to 55 SM-3 Block IB All-Up Rounds… Fiscal 2024 procurement funds in the amount of $443,645,069; and fiscal 2025 procurement funds in the amount of $56,354,931, will be obligated at the time of the award.” In their Fiscal Year (FY) 2025 budget request from March 2024, the MDA had decided to terminate procurement of the SM-3 Block IB in favour of the more capable but also more expensive SM-3 Block IIA.
That decision prompted immediate criticism from Congress, which was validated just a month after the budget request was submitted due to Iran’s April 2024 attack on Israel. Numerous SM-3s were expended by the US Navy to intercept Iranian ballistic missiles, which prompted then Secretary of the Navy Del Toro to express his concurrence with Congress that the MDA and Pentagon leadership needed to reconsider their decision to make the FY 2024 order the last lot. MDA had budgeted a total of $375 million in FY 2024 for the SM-3 IB program, of which $338 million was to procure 27 missiles, with a planned September 2024 contract award date. The FY 2025 request for the program was just $85 million for spare parts, to maintain the existing inventory. With the planned 27 missiles from last FY, total SM-3 IB procurement would have been 501 missiles, plus 21 delivered during the Research, Development, Test & Evaluation phase.
September 6, 2024 Reprogramming Actions revealed the Pentagon had at least decided that the combat expenditures needed to be replaced, with $226,750,000 in funds made available by the Israel Security Supplemental Appropriations Act transferred to the FY 2024 SM-3 IB account. Additional SM-3s, including Block IIAs, were subsequently expended during Iran’s October 1 attack on Israel, further increasing replacement requirements. Across two more Reprogramming Actions from November 7, 2024 and January 15, 2025, $427,500,000 was added to the SM-3 IB account for FY 2025. At some point a decision was made to delay the planned FY 2024 contract award and make the joint FY 2024 & FY 2025 award.
In a recent Congressional hearing, MDA Director General Collins confirmed that the receipt of that supplemental funding, plus a Department directed program increase of $110 million above the initial budget request of $85 million would give them additional “decision space” to determine the future of the SM-3 IB production line. The resourcing for SM-3 is being evaluated for both President Trump’s FY 2026 budget request and how it might fit into the Golden Dome architecture, which now has an initial draft.
Production of the FY 2024 lot was not even due to begin until December 2026, but with long lead times for key components in the supply chain like solid rocket motors, contracts need to be in place far in advance to ensure consistent production rates. In his written testimony to the committee, Collins stated that “MDA is proactively working to minimize and mitigate expected SM-3 Block IB production gaps while the Prime contractor works to complete its proposal in support of a synergy buy. With FY 2024 and FY 2025 funds, MDA is moving forward to award this contract for procurement of SM-3 Block IB missiles by the end of calendar year 2025.” That they managed to get this UCA awarded now, 8 months later than the planned date of September 2024 should go a long way to reduce production gaps. Waiting another 7 months could have had significant cost impacts, and FY 2024 unit pricing had already increased by 40% to $12.5 million due to the expiry of the Multi-Year Procurement contract for FY2019-FY2023.
In a statement to Defense Archives, MDA confirmed that the award of the UCA would “allow Raytheon to begin work while final contract pricing is negotiated, which is planned to be completed later this year” and deliver cost savings and “other efficiencies”. The exact impacts, both to the production schedule and unit costs, won’t be known until the full budget requests for FY 2026 are submitted to Congress though. As per the existing budget request, Raytheon had been producing on average 3-4 IBs per month, with a maximum capacity of 5. Not accounting for potential production gaps due to the delayed award, the delivery of the FY 2024 lot was not due to completed until December 2027. The addition of up to 28 more missiles will extend that for at least another 12 months. This gives the Pentagon a little extra breathing room to make a decision about the long term future of the program, but between the $110 million increase they are already giving it, and the nearly $900 million that Congress has for the Standard Missile family in their reconciliation bill, it seems likely that the IB is here to stay.
Note: Raytheon did not respond to Defense Archives’ request for comment for this story.