Oregon Sues Oracle Over Failed Healthcare Website

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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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