WASHINGTON -- Lockheed Martin Postal Systems of Owego, N.Y., has been awarded a $125 million U.S. Postal Service contract for computer software and hardware needed to sort mail faster.

Under the contract, Lockheed will upgrade 255 computers that read handwritten addresses. The company could receive an additional $28.8 million if the system can read more than 75 percent of sorted addresses. The project is to begin in August and be completed in 2001.

"It's a big piece of business," said Michael B. Schoultz, president of the Lockheed Martin Corp. unit.

The computer readers were first installed in July 1997, with a 2 percent successful reading rate. Today, after two upgrades, the computers can read 53 percent of all handwritten mail, the Postal Service said.

Since July 1997, the system has saved more than $340 million in labor costs, including $31 million during the Christmas season last year, the Postal Service said.