WASHINGTON (Reuters) - U.S. rocket propulsion startup Ursa Major said on Tuesday it was awarded a $12.5 million contract to build out production and testing for new solid fuel rocket engines.

The award, though small, is part of a bigger effort by the Pentagon to increase the number of rocket makers as stockpiles dwindle from supplying Ukraine and Israel in their ongoing wars.

CONTEXT

The agreement contains some of the first funds distributed from the Pentagon's Office of Strategic Capital which are meant to seed investment in the defense industrial base's supply chain. The Navy is also contributing to the $12.5 million award that is being matched by Ursa Major, culminating in a $25 million expansion of the company's solid rocket motor capabilities.

The investment will support Ursa Major's efforts to enhance its solid rocket motor manufacturing process under the Office of Strategic Capital's Transition Acceleration Program, which aims to fund development of future defense products.

Separately, the Navy awarded a contract earlier this year to address surging demand for the M104 engine which is used in RTX Corp's Standard Missile family of missiles. WHAT'S NEXT

Ursa Major's contribution to the investment will be directed toward completing an Advanced Manufacturing Pathfinder program, which includes the design, manufacture, and testing of a solid rocket motor prototype.

Tuesday's award is significant because it is one of the first from the Office of Strategic Capital, a fund which was established to boost public-private investments in critical technology areas for national security.