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Oregon Sues Oracle Over Failed Healthcare Website

Oracle first sued Oregon, and now the state responds with lawsuit claiming the company's "shoddy" performance is to blame for health insurance exchange website debacle.

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As threatened, the State of Oregon is suing Oracle, blaming the quality of the company's software and consulting services for the state's failure to produce a health insurance exchange website where citizens could sign up to receive coverage.

Although many state health insurance websites and the federal HealthCare.gov failed to perform as intended on October 1, 2013 -- the scheduled start of open enrollment under the Affordable Care Act championed by President Obama -- Oracle was the runt of the litter. The Cover Oregon website never enrolled anyone entirely online, although the state managed to enroll more than 100,000 citizens anyway through back-end processes, including a version of the website available only to insurance agents and other intermediaries.

For months, Oregon Gov. John Kitzhaber has been threatening a lawsuit against Oregon, the lead contractor on the project. It took long enough that, meanwhile, Oracle filed its own lawsuit against the state, suggesting that the state was dragging the company's name through the mud as a political tactic without any legal basis. Oracle disputes many of the basic facts, including the charge that the version of its website intended for public consumption was never functional enough to launch. Oracle says the state elected not to launch it for political reasons.

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Oregon's complaint filed Friday morning in Marion County Circuit Court accuses Oracle of charging hundreds of millions of dollars for software and consulting services and "then repeatedly breached those contracts by failing to deliver on its obligations, overcharging for poorly trained Oracle personnel to provide incompetent work, hiding from the State the true extent of Oracle's shoddy performance, continuing to promise what it could not deliver, and wilfully refusing to honor its warranty to fix its errors without charge."

In response, Oracle released a brief prepared statement: "The lawsuit filed today against Oracle by the Attorney General of Oregon is a desperate attempt to deflect blame from Cover Oregon and the Governor for their failures to manage a complex IT project. The complaint is a fictional account of the Oregon Healthcare Project. Oracle is confident that the truth - and Oracle - will prevail in this action and the one filed by Oracle against Cover Oregon two weeks ago in federal court."

"Today's lawsuit clearly explains how egregiously Oracle has disserved Oregonians and our state agencies," Attorney General Rosenblum said in a prepared statement, part of a press release announcing the lawsuit. "Over the course of our investigation, it became abundantly clear that Oracle repeatedly lied and defrauded the state. Through this legal action, we intend to make our state whole, and make sure taxpayers aren't left holding the bag."

Although the state lays responsibility for the failure of the project on Oracle, one of the counter-claims from Oracle -- and also an observation made in several independent audits and investigative reports -- is that the state took on overall responsibility for the project when it decided against hiring a systems integrator. Oracle never accepted that responsibility, at least not officially, and maintains it was merely the largest contractor among several working on the project. A systems integrator might have acted as the general contractor, keeping everything on schedule and making sure requirements were clearly defined, but because the state was acting as its own integrator it bears the ultimate responsibility for whatever pieces fell through the cracks.

The state's lawsuit claims this structure was the result of behind-the scenes maneuvering early in the project. Oregon's Department of Health Services originally planned to hire a systems integrator, but Oracle personnel argued that doing so would just cause delay. "Oracle recommended to the State that it hire Oracle's own internal consulting unit, Oracle Consulting Services, to play the same role. Oracle also offered to provide training services to State employees, enabling the State to believe that it, along with Oracle, could co-manage the Projects without hiring an independent Systems Integrator. Oracle continued to support the State's decision through the life of the project," reads the complaint.

"Oracle's behind-the-scene scheme paid off, for Oracle," it continues. "Oracle convinced the State to spend millions of dollars more to use Oracle Consulting Services to design, plan, integrate and manage the Projects. Oracle became, in effect, the Systems Integrator, bringing on project managers and taking the lead in proposing system architecture, selecting software and hardware, and managing the Projects. From 2011 on, Oracle was the technical lead on both Projects and was responsible for the development of the technology."

Oracle presented the state with more than $240 million in "false claims," according the lawsuit. In addition to going after Oracle Corp. for penalties and a refund of money paid to it, the suit names six Oracle employees including CEO Safra Catz as having personal responsibility for the alleged failures.

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David F. Carr oversees InformationWeek's coverage of government and healthcare IT. He previously led coverage of social business and education technologies and continues to contribute in those areas. He is the editor of Social Collaboration for Dummies (Wiley, Oct. 2013) and ... View Full Bio

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yalanand
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yalanand,
User Rank: Ninja
8/30/2014 | 3:14:32 PM
Oracle is having the brunt of the work process
It will be interesting to see the culminations ofthese court battles where one party blames the other for each other's failure. Oracle's suit did place blame for the botched Oregon's ObamaCare website on the state, claiming that Oregon failed to employ a "Systems Integrator" to run the company's work on the website.

The state has been threatening to sue Oracle for a long time now and it eventually happened, shifting the blame to Oregon saying that the company advised the state not to hire a "Systems Integrator" and instead soughtOracle Consulting Services to work out the integration and management of the project. There will be twists and turns, but not welcome for Oracle.
mak63
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mak63,
User Rank: Ninja
8/25/2014 | 8:48:36 PM
angry customer
As an Oregon resident, I'm happy that someone is held accountable. specially, if that someone is Oracle.
The website was not user friendly. Tried to sign up a few times, but it failed.
Alison_Diana
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Alison_Diana,
User Rank: Author
8/25/2014 | 4:36:27 PM
Re: Cover Oregon vs. Oracle Corp.
Very funny -- and quite right, @rcrutchlow. I like the rabbit/lettuce analogy... much cuter than cat among the pigeons or fox in the henhouse -- and perhaps accurate. No doubt we'll discover more details of the contract's wording as the case moves along.
rcrutchlowl6m
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rcrutchlowl6m,
User Rank: Apprentice
8/25/2014 | 2:55:20 PM
Re: Cover Oregon vs. Oracle Corp.

If, and that is a really big IF, the State of Oregon allowed or specifically directed Oracle to assume overall project responsibility as SI then they were truly ... um ... unsophisticated. They essentially asked the Rabbit to carry the lettuce.

Similarily, if, and that is a really big IF, Oracle campaigned and sold the State of Oregon on their ability to not only manage the design and implementation from a technical perspective but to also integrate the activities of numerous sub-contractors and the myriad business processes then they are likely culpable of over-promising and under-delivering.

Either way or both, it is certainly one ugly baby ... or possibly twins!

Alison_Diana
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Alison_Diana,
User Rank: Author
8/25/2014 | 2:15:36 PM
Re: Cover Oregon vs. Oracle Corp.
I completely agree with you about the integral part a high-quality, experienced systems integrator plays in initiatives like Cover Oracle. Nobody would start a business project with a project manager. Yet we keep seeing instances of rudderless technology initiatives at state and federal levels. It's not as if there's a dearth of good SIs out there. Sure, the failures make news (and they should), but there are many, many successes.
rcrutchlowl6m
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rcrutchlowl6m,
User Rank: Apprentice
8/25/2014 | 12:11:39 PM
Re: Cover Oregon vs. Oracle Corp.

Disclosure: I am an old X-Oraclite (Pres/COO - Oracle Canada). One thing that I knew is that Oracle always had (and still has) good lawyers.

I suspect the contract that Oracle accepted was very specific regarding their obligations and deliverables. There was, as I understand it, multiple sub-contractors over which Oracle exercised little or no responsibility or control. That responsibility falls within the purview of the project lead, that is, the State of Oregon.

This project implosion was not simply, as Oregon would have us believe, due to a single point of failure (i.e. Oracle). It was a massive, systemic failure across the whole project that was the result of incredibly poor planning, system design, project management and delivery. The fact that Oracle would have allowed this project to degrade to such a dysfunctional state is mind-boggling and certainly does not look good on them and in that they bear a great deal of responsibility. Similarily, the State of Oregon certainly can't adopt the "We were mislead" defense. That just makes them look incompetent and totally inept.

I suspect the litigation and counter litigation will be tied up in nebulous change orders and poorly or un-documented and articulated project direction. The project, while large and complex, did not require any wildly advanced IT innovation.

No winners here (especiially Oregon taxpayers) except the lawyers and MBA case studies.

PedroGonzales
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PedroGonzales,
User Rank: Ninja
8/25/2014 | 11:22:09 AM
Re: Cover Oregon vs. Oracle Corp.
The only group of people which benefits in such situations are the lawyers. Who know how much they will be making so that they can defend their customer's arguments in court.
David F. Carr
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David F. Carr,
User Rank: Author
8/25/2014 | 10:45:22 AM
Re: Cover Oregon vs. Oracle Corp.
The state's explanation that it was somehow fast-talked into letting Oracle act as de facto system integrator (without ever writing that obligation into the contract) strikes me as lame and legally questionable.
zaious
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zaious,
User Rank: Ninja
8/25/2014 | 1:52:45 AM
Re: Cover Oregon vs. Oracle Corp.
It is gettign complicated. Sueing and counterign with another one is not somethign that we want to see between two parties that worked together in past. The legal procedures are expensive and lengthy -it sucks out the fun out of the IT.
PedroGonzales
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PedroGonzales,
User Rank: Ninja
8/24/2014 | 2:04:33 PM
Re: Cover Oregon vs. Oracle Corp.
We already know that the chance of IT projects to fail is huge.  Now that this problem went to court it is going to leave a bitter taste for both parties.   It will be interesting to know whether other companies based on this precedent will in other states be reluctant to work with IT companies for large projects.
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