U.S. Navy Seals $1.7 Billion APKWS Contract With BAE Systems as Demand for Low-Cost Precision Weapons Surges

The U.S. Navy has finalized a major five-year, indefinite-delivery/indefinite-quantity contract with BAE Systems, confirming a ceiling value of $1.7 billion for the continued production of Advanced Precision Kill Weapon System (APKWS) laser-guidance kits. The announcement, made on December 10, 2025, includes an initial funded order of $322 million, formally launching the next phase of high-volume manufacturing as U.S. forces and allies accelerate the procurement of cost-effective precision weapons.

The multi-year agreement—structured as an IDIQ vehicle—allows the Navy to place annual delivery orders for tens of thousands of guidance sections, ensuring both procurement flexibility and a stable industrial base at a moment when operational consumption rates remain exceptionally high. According to BAE Systems, the guidance kits will be produced in Hudson, New Hampshire, and Austin, Texas, continuing more than a decade of continuous manufacturing for the program.

A Scalable Precision Weapon for Modern Combat

APKWS is not a new missile but a mid-body guidance kit added between the motor and warhead of the widely used 70 mm Hydra rocket, converting existing stockpiles into semi-active laser–guided munitions. The U.S. designation AGR-20 APKWS II covers the fully assembled round, combining the WGU-59A/B guidance section with legacy motors and warheads.

The system’s key feature is its distributed aperture laser seeker, embedded in the forward canards, which provides sub-meter accuracy while maintaining a relatively small warhead—making it suitable for urban combat and low-collateral engagements. Because the kit is compatible with standard 70 mm launchers, APKWS can be fired from:

• Rotary-wing aircraft (AH-1Z, UH-1Y, AH-64, MH-60)

• Fixed-wing jets (A-10, F-16, F/A-18)

• Unmanned systems (MQ-8 Fire Scout)

• Vehicle-mounted ground launchers (VAMPIRE, EAGLS)

• Naval platforms with 70 mm launcher pods

The weapon’s modularity and low cost have made it a core U.S. precision effector, filling the gap between unguided rockets and higher-end missiles like Hellfire and AMRAAM.

Rising Operational Demand and New Mission Profiles

Since its first use in Afghanistan in 2012, APKWS has rapidly expanded from a niche close-air-support tool into a multi-domain weapon. Hundreds of rounds were fired during the anti-ISIS campaigns, where aircraft required precision with minimal collateral damage.

The weapon has since emerged as a frontline counter-UAS interceptor, with 2019 trials proving its ability to destroy drone targets and even low-flying cruise-missile surrogates. Subsequent tests under the Joint Counter-Small UAS Office confirmed a high kill probability at a fraction of the cost of traditional interceptors.

U.S. Central Command has publicly highlighted APKWS’ role in recent Middle East operations. In one seven-week period, nearly 40% of drone kills were made using APKWS fired from fighter aircraft—demonstrating its utility as a low-cost alternative to expendable air-to-air missiles.

For ground forces and partners such as Ukraine, mobile launchers like VAMPIRE and EAGLS have extended APKWS into short-range air-defense roles, creating a rapidly deployable, truck-mounted anti-drone capability.

C

ost Advantage Drives Global Adoption

One of APKWS’s strongest advantages is its affordability. Open sources estimate the unit price of a complete rocket in the mid-$20,000 range, roughly one-third of a typical laser-guided bomb and dramatically cheaper than most air-defense missiles. This cost-exchange ratio is particularly critical against drones, many of which cost similar or smaller amounts.

APKWS has become the U.S. government’s official program of record for 70 mm guided rockets, surpassing competitors such as:

• Lockheed Martin DAGR

• Roketsan Cirit

• Thales FZ275 LGR

Its compatibility with existing Hydra stockpiles and launchers has made it attractive across NATO and allied air forces. Several European nations are now evaluating or integrating APKWS on platforms such as Eurofighter Typhoon, NH90, and H145M. BAE Systems is also showcasing APKWS-armed Malloy TRV-150 drones, positioning the weapon as part of a new mobile counter-drone ecosystem.

Contract Significance and Long-Term Production Outlook

The new Navy contract builds on a long series of expanding APKWS awards:

• 2018: $224 million contract for 10,000+ rounds

• 2019: $2.68 billion IDIQ for Lots 8–12 (full-rate production)

• 2025 (August): $1.7 billion IDIQ for Lots 13–17, covering up to 55,000 kits through 2031

• 2025 (December 10): $322 million initial order triggering the Lot 13–17 production cycle

Combined, these multi-year programs have elevated APKWS into a multi-billion-dollar modernization effort with strategic implications for U.S. and allied force readiness.

Defense officials note that the IDIQ structure gives the Pentagon the flexibility to scale production “as needed” amid fluctuating consumption, while ensuring BAE Systems can maintain workforce stability, tooling, and supply chains. Stockpiles of low-cost effectors have become a critical priority as militaries grapple with high drone usage and the need to conserve expensive missiles like AIM-120 AMRAAM, AIM-9X, NASAMS interceptors, and Patriot rounds.

A Cornerstone of Future Air-Defense and Precision-Strike Doctrine

Strategically, the Navy’s contract underscores a broader shift toward layered, high-volume precision strike and air-defense architectures. By enabling tens of thousands of guided rockets each year, APKWS provides a reliable and affordable tool for daily tactical engagements, allowing high-end missile inventories to be preserved for major threats.

For allies, the expanding availability of APKWS through Foreign Military Sales creates a de facto standard for NATO precision-rocket systems at a time of heightened demand due to conflicts in Europe and the Middle East.

With new ground, naval, and unmanned applications emerging, the weapon is now positioned at the center of Western defense planning for counter-drone warfare and precision engagements through the end of the decade.

The December contract confirms APKWS not as a simple upgrade to legacy rockets, but as a fully mature, scalable precision-strike solution that will shape U.S. and allied combat capabilities for years to come.