U.S. Air Force awards $145 million sole-source contract to BAE Systems for dual-mode APKWS upgrade U.S. Air Force awards $145 million sole-source contract to BAE Systems for dual-mode APKWS upgrade [ ** ] [![Defence Industry Europe]] [![DIE logo]]

• [LinkedIn] February 18, 2026

U.S. Air Force awards $145 million sole-source contract to BAE Systems for dual-mode APKWS upgrade

By Martin Chomsky (Defence Industry Europe) ![The U.S. Navy has awarded BAE Systems a five-year contract worth up to $1.7 billion for continued production of APKWS laser guidance kits, beginning with an initial order valued at $322 million. The agreement allows the Navy to procure tens of thousands of additional low-cost precision munitions to meet rising domestic and international demand.] Image: BAE Systems. The U.S. Air Force has released details of a $145 million contract action to develop and integrate an Air-to-Air Dual Mode weapon based on the Advanced Precision Kill Weapon System. The effort is designed to counter large groups of unmanned aerial systems, particularly lower-cost Group 3 drones. According to a Justification and Approval document published February 13, 2026, the program supports a Joint Urgent Operational Need issued by combatant commanders in August 2024. The requirement was driven by what officials described as “growing risks from mass attacks involving lower-cost Group 3 drones, potentially numbering in the hundreds,” especially within the U.S. Central Command area of responsibility. The program centers on upgrading the AGR-20F APKWS rocket, also known as FALCO, to create prototype air-to-air rounds. The new configuration adds a nose-mounted Long Wave Infrared seeker, a mid-body warhead, and a dual safe proximity fuze intended to defeat Group 3 unmanned aerial system threats. According to the document, the design allows a handoff from laser designation to infrared homing, reducing the time aircrews must maintain laser contact with a target. The Air Force stated that “the modification minimizes exposure during engagements while allowing faster targeting cycles against multiple airborne threats,” while keeping compatibility with the existing APKWS interface developed by BAE Systems. The contract is structured as an Indefinite Delivery/Indefinite Quantity agreement and is expected to be awarded on a sole-source basis to BAE Systems in Hudson, New Hampshire. Work must begin no later than the second quarter of fiscal year 2026 to meet operational timelines set by U.S. Central Command and Air Force Central Command. Under the plan, government personnel will assemble 300 prototype All-Up Rounds using components delivered through the contract. Of those, 100 rounds will support integration and qualification testing, while 200 will be used as operational test assets deployed for evaluation in operational environments. The prototypes are intended to provide an initial capability within 24