U.S. Air Force Bets $145 Million on a Cheap Drone-Swarm Killer: the Dual-Mode APKWS II

The U.S. Air Force has taken a meaningful step toward a low-cost air-defense answer for drone swarms, awarding BAE Systems a sole-source contract worth up to $145 million to develop a “dual-mode” air-to-air variant of the laser-guided APKWS II rocket. The aim is to destroy hostile uncrewed aircraft economically, using far cheaper guided rockets rather than conventional air-to-air missiles that run into the hundreds of thousands of dollars each.

At the heart of the deal sits one of the modern battlefield’s most uncomfortable equations. Shooting down a few-thousand-dollar attack drone with a million-dollar missile may work tactically, but it is unsustainable economically. In a swarm attack, where hundreds of vehicles arrive at once, that math turns sharply against the defender. Washington’s move is aimed squarely at breaking that imbalance.

The numbers behind the contract

The award to New Hampshire-based BAE Systems is structured as an indefinite-delivery/indefinite-quantity (IDIQ) contract with a $145 million ceiling. The initial delivery order was set at roughly $66.7 million, and the contract is recorded under the number FA8681-26-D-B001. The program is managed by the Air Force Life Cycle Management Center at Eglin Air Force Base in Florida.

The contract runs through February 12, 2031, with the first delivery targeted for July 31, 2027. Of the budget, about $62 million is earmarked for component development, $56 million for test and qualification, and $27 million for technical risk reduction and airworthiness certification. Under the plan, government personnel will assemble a total of 300 prototype All-Up Rounds; 100 will be used in integration and qualification testing, and 200 for evaluation in operational settings.

The sole-source nature of the award also drew attention. Despite 43 responses to a request for information (RFI) issued in March 2025, the Air Force designated BAE Systems as the “only capable source” able to meet the required delivery schedule, arguing that alternative solutions could not satisfy airworthiness standards or the timeline and that a delay could exceed 44 months.

What does “dual-mode” actually mean?

APKWS (Advanced Precision Kill Weapon System) is not a new missile at all. It is a BAE Systems guidance kit that bolts onto the body of the unguided 2.75-inch (70 mm) Hydra 70 rocket, a munition that has been in inventory for decades, turning that simple and cheap round into a laser-guided precision weapon. The standard version mounts a Distributed Aperture Semi-Active Laser Seeker (DASALS) across four wings; once a target is painted by a laser designator, the rocket rides that reflection to its mark.

The new “dual-mode” version adds a second eye to that architecture. In the configuration designated AGR-20F and known by the code name “FALCO,” a long-wave infrared (LWIR) seeker is mounted in the rocket’s nose, while the warhead in the midsection is fitted with a dual-safe proximity fuze. Rather than waiting for a direct hit, that fuze detonates once the rocket is close enough, raising the odds of a kill against small, agile aerial targets.

In practice, that means a critical break for the pilot. With laser guidance alone, the pilot has to keep the laser on the target until the rocket arrives. In the dual-mode system, the laser channel handles only the initial target hand-off and geometry, then passes the guidance task to the infrared seeker. The rocket thus moves closer to a “fire-and-forget” logic; the pilot can engage one target and immediately shift to the next. In a swarm attack with hundreds of drones inbound at once, that time saving translates directly into survivability.

The cost-effectiveness equation

The real rationale for this program lies less in technology than in economics. Open-source estimates put the all-in cost of an APKWS rocket at roughly $20,000 to $30,000. A typical air-to-air missile such as the AIM-9X Sidewinder, by contrast, carries a unit cost approaching $400,000. In other words, when the defender answers an attack drone with a cheap rocket, the cost curve finally bends in its favor.

Another gain is in carriage capacity. Fit two seven-shot rocket pods in place of a single conventional air-to-air missile, and the number of engagement opportunities a fighter has on a single sortie multiplies. More shots on board means, quite literally, more chances to score against a swarm threat.

Which platforms will carry it?

The near-term test focus of the program is the F-16. Because APKWS can use the targeting pods aircraft already carry for designation—such as Litening or Sniper—it can be integrated without burdening existing infrastructure. The rocket’s reliance on an existing motor and logistics chain further reinforces the cost advantage.

The threat profile is clearly defined: Group 3 uncrewed aircraft flying below 18,000 feet and weighing more than 55 pounds (about 25 kg). That category covers the relatively low-cost vehicles that have grown ever more visible in recent conflicts, posing a serious threat through sheer numbers. The deal traces back to a Joint Urgent Operational Need (JUON) raised by combatant commanders in August 2024, which called for a counter to swarm attacks of hundreds of vehicles that did not lean on high-cost missiles.

Part of a global trend

The U.S. move is not an isolated choice. The threat posed by cheap, numerous drones has triggered similar searches worldwide, and the shared agenda across defense industries is now to find the “cheap answer to an expensive threat” formula. Guided rockets, laser systems and low-cost interceptors stand out as different solutions to the same equation. The dual-mode APKWS II sits on the table as one of the most concrete examples—and one expected to reach the field fastest.

The U.S. Air Force aims to field the prototype munition by 2027. If the test program runs to schedule, fighters could before long take off with a far more economical defense option against drone swarms.

Open-source verification notes

• The $145 million value, the sole-source contract structure and the FA8681-26-D-B001 contract number were verified by Army Recognition and defence-industry.eu.
• The “dual-mode” definition (laser designation + nose-mounted long-wave infrared LWIR seeker + proximity fuze) and the AGR-20F / “FALCO” naming appeared consistently across multiple independent sources.
• The unit-cost comparison (~$20,000–$30,000 APKWS vs. ~$400,000 AIM-9X) and the 300 prototype rounds were confirmed by sources; the cost figures are open-source estimates.
• F-16 integration was verified as the near-term test focus; the full operational platform list has not yet been finalized.

Sources

• Army Recognition — “U.S. Air Force Approves $145M Dual-Mode APKWS II Air-to-Air Rocket to Counter Drone Swarms”
• defence-industry.eu — “U.S. Air Force awards $145 million sole-source contract to BAE Systems for dual-mode APKWS upgrade”
• Military Aerospace — “BAE Systems to upgrade APKWS air-to-air rockets to take-on swarms of enemy small uncrewed aircraft”
• BAE Systems official product page — APKWS laser-guidance kit