Lockheed Martin’s bottom line is starting to look a little less green. The reason? Its development on the next generation of pinpoint accurate GPS satellites is over budget to the tune of 70 million dollars. The reason comes down to engineering: the developers of this new technology are simply taking more time than was budgeted. The over-the-limit numbers come as a result of legislation introduced to keep government overspending capped off. While Lockheed Martin may not be pleased with the budget overrun in the short term, it still may be pleased with the project’s profitability in the long term.
It’s a classic engineering situation: making a good product takes time. The GPS III project is a new series of GPS satellites designed to replace the entire fleet of GPS satellites now in orbit. The explosion of demand for GPS technology, both in the government and consumer sectors, has mandated a more up to date, more advanced, more accurate, more prolific set of satellites in orbit to bring more accurate, convenient GPS tracking worldwide.
As often happens with product development, the engineers have run into a few snags. Such tasks always tend to go overbudget in terms of both time and money. When that happens, the company footing the bill has two options: either release the unfinished product and hope it sells well, or go overbudget, build a good product, and reap the rewards. In this case, probably due to government mandates, Lookheed Martin has chosen to go overbudget and build the GPS III satellites right.
Why Is It Costing Lockheed Martin?
Why is Lockheed Martin now footing the bill for this largely government funded project? The answer hearkens back to defense spending cuts, and a drama centering around the F-22 Raptor fighter jet. Development went overbudget, and taxpayers were footing the bill for the difference. After major controversies, and budget cuts, the government decided that developers should foot the bill on such cost overruns. It happened with Lockheed Martin’s development of the F-35 Joint Strike Fighter, and it’s happening now with development of the GPS III satellite.
The Future of GPS
Either way, it’s unlikely that Lockheed Martin is breaking a sweat on the cost overruns, as the result will be a key stake in the future of GPS, an exploding industry that the developer will want to keep its grip on.