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6/1/2011
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Oracle Lobs $5.3 Million Countersuit At University

Montclair State's April lawsuit against the vendor alleges the school was left holding the bag for a failed PeopleSoft ERP implementation.

In a May 27 filing, Oracle has denied the charges listed in a Montclair State University complaint that Oracle failed to live up the terms of an enterprise resource planning (ERP) installation at the school.

New Jersey's second largest public university, with 18,400 students, filed suit April 29 over its failed Bell Tower Initiative, an attempt to integrate systems and give students and administration access to more information through a new Web portal. The university staff selected Oracle to make a PeopleSoft implementation to achieve those goals.

If nothing else, the suit represents the level of misunderstanding that can exist between two parties as they undertake a complicated, joint ERP project. Montclair State said its project with Oracle has led to $20 million in cost overruns. It's charged Oracle with "breach of contract, gross negligence, willful misconduct, and fraud." The university said it will cost $15 million to complete the project through a second contractor.

Oracle in its response asked Judge Freda Wilson to dismiss the claims of "gross professional negligence" and "legal fraud." It has denied the other charges.

Oracle in turn said in its filing that, as issues arose, it became clear that university officials "did not adequately understand the technology and the steps necessary to complete the project." It has filed a counterclaim for $5.3 million that it says it is still owed for work done. As opposed to working out the problems of the contract, it says the university "embarked on a misguided ruse which, unfortunately, is costing taxpayers of N.J. millions of dollars."

In its April 29 complaint in U.S. district court in Trenton, N.J., the school said Oracle demanded payment of $8 million beyond its fixed fees in September 2010. When the school refused at a final meeting Oct. 25, Oracle turned in its keys to university facilities, said "we're out of here," and walked away Nov. 1, 2010, leaving the school with an unfinished project.

As ongoing disputes over progress in the project deepened, the school brought in an Illinois lawyer to supervise, who collected fees from the university as disputes continued. Finally, the Illinois lawyer directed the school to "lock Oracle out" from the project, Oracle's response says.

The Bell Tower Initiative was set up in 2009 and scheduled to be completed in 25 months. The agreement called for the school to pay Oracle $15.75 million for implementation services and $4.3 million for software and technical support. Almost from the start, numerous disputes arose between the two parties over supervision, progress, and method of implementation.

For example, Oracle was supposed to implement its iProjects project management system for joint use with the university but found it couldn't do so. It then agreed to implement Blackboard's repository for project documentation because the school already had a license for it, but Blackboard lacked document-change control and version tracking, among other things. "Blackboard proved ineffective as a project repository because it lacked many simple tools," the university complaint said.

Likewise, the plan to implement a shared project management system promptly derailed, according to the complaint. The agreement called for Oracle to be paid $65,800 a month for such a system, which was to be installed "within the first few weeks of the project." The system would be used to track various parts of the initiative and measure progress against named milestones. Oracle was responsible for keeping the system up to date.

The failure to get a full project management system installed "lead to confusion among Oracle and University staff," the complaint asserted. A draft plan was launched by Oracle but it had little relevance to the project. According to the complaint, the plan inserted fake dates of 2015 for the campus solutions part of the project, 2021 for human capital management, and 2020 for the financial management system (FMS), dates that were far beyond the project's life expectancy.

Oracle's filings refers to these charges and responds, "Defendant denies each and every allegation..."

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