The Smart Rocket: How BAE's $1.7B Contract Fuels a Munitions Revolution

HUDSON, NH – December 10, 2025 – The U.S. Navy has awarded BAE Systems a landmark five-year contract with a ceiling of $1.7 billion for the continued production of its Advanced Precision Kill Weapon System (APKWS) laser-guidance kits. This deal, which includes an initial $322 million order, is more than just a massive defense procurement; it’s a powerful endorsement of a disruptive technology that is fundamentally reshaping the economics of precision warfare and the logistics that support it.

The indefinite delivery, indefinite quantity (IDIQ) contract ensures a steady flow of tens of thousands of these "smart" rocket kits to the U.S. armed forces and their allies. For over a decade, the APKWS has quietly revolutionized the battlefield by transforming ubiquitous, unguided 2.75-inch rockets into highly accurate, laser-guided munitions. This latest contract solidifies its role as a cornerstone of modern military strategy, emphasizing a critical shift towards cost-effective, adaptable, and surgically precise firepower.

The 'Plug-and-Play' Precision Revolution

At the heart of the APKWS's success is its elegant simplicity and profound impact. The system is a 'plug-and-play' kit that is installed between the warhead and motor of a standard Hydra 70 rocket, a munition stockpiled in vast quantities by the U.S. and its partners. This modular approach avoids the need for a completely new missile system, creating immense value by upgrading existing inventory.

The innovation lies in BAE Systems' proprietary Distributed Aperture Semi-Active Laser Seeker (DASALS) technology. Instead of a single seeker in the nose, the APKWS places optics on its four guidance wings, which deploy after launch. These seekers lock onto a laser spot painted on a target by ground forces, aircraft, or drones, guiding the rocket with incredible accuracy. Combat data has demonstrated a hit rate exceeding 90 percent, with the rocket striking within a meter of the laser designator.

This level of precision drastically minimizes collateral damage, a critical requirement in modern counter-insurgency and urban warfare scenarios. But it's the cost-benefit analysis that truly highlights the system's disruptive power. An APKWS kit costs approximately $35,000 per unit. In contrast, a traditional anti-armor missile like the AGM-114 Hellfire can cost upwards of $100,000, while more advanced missiles can run into the hundreds of thousands. For engaging a wide range of soft and lightly armored targets—from vehicles to small structures—the APKWS provides a lethal, low-cost alternative that preserves more expensive assets for high-value threats.

"This award reinforces the value of proven and cost-efficient precision munitions, which have consistently demonstrated their effectiveness and versatility across multiple platforms and missions," said Neeta Jayaraman, director of Precision Guidance and Sensing Solutions at BAE Systems, in a statement accompanying the announcement.

The system's versatility is a force multiplier. It has been qualified for use on over a dozen platforms, including AH-64 Apache and AH-1W Cobra attack helicopters, F-16 and A-10 fixed-wing aircraft, and even unmanned aerial vehicles (UAVs). This cross-platform compatibility simplifies logistics and training, allowing a single, proven munition to serve a multitude of roles across different branches of the military.

Securing a Decade of Dominance

This $1.7 billion contract is not just a one-off purchase; it's a strategic investment that secures a production pipeline for Full Rate Production Lots 13 through 17, potentially extending deliveries to 2031. For BAE Systems, it solidifies its market dominance in this niche. The APKWS is the U.S. government's sole Program of Record for 2.75-inch guided rockets, meaning this contract was awarded without competition, a testament to the system's proven performance and entrenched position within the military's arsenal.

The company has been in full-rate production of the APKWS for over 12 years, delivering more than 50,000 units to date. This long-term experience has allowed BAE Systems to build a robust and resilient supply chain. Production is centered at its state-of-the-art facilities in Hudson, New Hampshire, and Austin, Texas, with a network of suppliers across the U.S., UK, and Canada. This established manufacturing ecosystem gives the company a proven capacity to produce over 25,000 units annually and the agility to scale up to meet surges in demand.

The IDIQ contract structure provides both stability for the manufacturer and flexibility for the Pentagon. It allows the Navy, Army, and Air Force to place orders as needed over five years, ensuring a reliable supply without a massive upfront financial commitment. This model is ideal for managing inventories of munitions that are in high and consistent demand, reflecting the APKWS's transition from a novel technology to a staple of expeditionary warfare. The contract's value underscores the immense and growing demand, building on a previous $2.68 billion IDIQ award from 2019.

Arming Allies and Adapting to New Threats

A crucial dimension of the APKWS program is its role in international security through Foreign Military Sales (FMS). The system has been sold to a growing list of U.S. allies, including the United Kingdom, Australia, Jordan, Iraq, the United Arab Emirates, and the Philippines. By providing a cost-effective precision strike capability, the U.S. enhances the defensive capabilities of its partners, promotes coalition interoperability, and strengthens strategic alliances.

For these nations, the APKWS offers a powerful tool to counter regional threats, conduct counterterrorism operations, and secure their borders with greater precision and less risk to civilian populations. The system's affordability and compatibility with existing rocket inventories make it an accessible upgrade for nations with limited defense budgets, democratizing access to precision-guided technology.

Perhaps most significantly, the APKWS is demonstrating its adaptability in the face of emerging threats. The proliferation of hostile drones has become a major challenge for armed forces globally. Using a million-dollar air-to-air missile to down a ten-thousand-dollar drone is an unsustainable economic proposition. Recognizing this, the U.S. Air Force has increasingly turned to the APKWS as a cost-effective counter-UAS solution. When paired with a proximity fuze, the laser-guided rocket can effectively destroy Class 2 drones, providing a much-needed layer of defense for airbases and ground forces. F-16s and A-10s have already successfully used the system in this air-to-air role in the Middle East, proving its value far beyond its original air-to-ground design. This new contract ensures that the U.S. and its allies will have a deep inventory of this versatile weapon as they continue to navigate the complex and rapidly evolving challenges of 21st-century conflict.