Failed contract incentive causes Lockheed to lose $70 million

CORRECTION: This story has been updated to more accurately reflect the costs borne by Lockheed Martin.

Lockheed Martin Corp. snares many high-price contracts, but the defense contractor's pockets will feel lighter this week after news it largely exceeded the price of an Air Force contract by spending $1.62 billion for two Global Positioning System satellites.

The Air Force was prepared to spend the estimated price of $1.5 billion for the contractor to "develop, test, and build" the two new satellites which are more accurate, less prone to jamming and contain a signal compatible with Europe's Galileo system, reports the Washington Post.

The overrun will cost Lockheed its 5 percent fee (always calculated based on the target cost) or about $70 million, the news report said.

Lockheed Martin, of Bethesda, Md., ranks No. 1 on Washington Technology’s 2011 Top 100 list of the largest federal government contractors.