WASHINGTON -- The U.S. Army has awarded Other Transaction Authority (OTA) prototype agreements to five defense firms, pitting venture-backed startups Anduril Industries, Castelion, and Mach Industries directly against prime defense incumbents Lockheed Martin and RTX, to develop next-generation prototypes for the Precision Strike Missile (PrSM) Increment 4 program.
The decision represents a major structural shift in how the Pentagon procures strategic long-range precision fires, opening traditionally prime-dominated missile programs to commercial defense tech upstarts.
The Army originally awarded preliminary design contracts for PrSM Increment 4 to Lockheed Martin and an RTX/Northrop Grumman team in 2023. However, following an April solicitation that reopened the program, the Army opted to broaden the industrial base by incorporating fast-paced, private-capital-backed entrants into the development pipeline. The move follows heavy demand signal pressures on precision munitions inventories and reflects the DoD’s broader strategy to use OTAs to bypass traditional FAR-based procurement delays, leveraging venture-backed manufacturing capacity to drive down cost per round and accelerate manufacturing cycles.
The PrSM Increment 4 competition follows a phased multi-year testing pipeline. Fiscal Year 2027 opens with a live competitive fly-off among all five vendors to determine the initial down-select. Advancing participants will execute follow-on agreements in Fiscal Year 2028, culminating in a secondary operational fly-off to evaluate refined missile systems. The Army targets Fiscal Year 2030 for its final down-select and primary production contract award.
Including venture-funded startups like Anduril, Castelion, and Mach Industries marks a crucial test for whether non-traditional defense contractors can transition from software-defined systems and anti-drone platforms into capital-intensive, hardware-heavy strategic strike systems. While incumbents possess decades of integration experience and existing missile production lines, the startups bring agile hardware manufacturing, lower unit costs, and venture capital readiness to challenge legacy pricing models.
