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.

Charles Babcock, Editor at Large, Cloud

June 1, 2011

7 Min Read

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..." With no project tracking in place, distrust between the university and Oracle grew. An issues and risks log was also a source of contention, with the university charging that Oracle neither kept it up to date nor hesitated to unilaterally delete its contents. "Instead, Oracle chose to embed issues and risks in weekly status reports, causing major issues and risks to be lost with simple project problems that required minor fixes."

Oracle denied the allegation in its response.

The university created a status report that showed the FMS coded red because it was so far behind schedule. Oracle project manager Christian Kim agreed with the coding, but Oracle lead project manager Robert Kohler changed the coding to yellow at a project meeting and issued Oracle's official report with the same coding, according to the complaint. The university needed the FMS part of the project to go live July 1, 2010, but had to delay its launch date, due to setbacks in its progress. What the university called the "high-level project plan" called for it to be completed June 30, 2010.

Oracle denied the allegation. All in all, the Oracle response in 73 instances repeats the phrase, "defendant denies each and every allegation," says previous denials apply in two items, and adds "denies the allegations" in two others over the course of 78 paragraphs.

The lack of project status reports created "constant uncertainty for the University regarding where they were in the Bell Tower Initiative, what tasks were to be done next and who was responsible for what tasks," the school's complaint said.

"The University was left without critical project-related information to ensure BTI was being implemented on time and within budget," it added.

University participants in the project were often given one week's notice of what they needed to supply, even though they were engaged in a regular job over and above the project. "Oracle sequenced project tasks to align with payment milestones," the complaint charged.

Oracle denied the charges.

"Oracle treated the project planning report as a nuisance rather than the critically important tool it is..." the complaint continued.

Oracle also asked the university to use the vendor's proprietary Compass implementation methodologies, then employed "subcontractors who had no knowledge of [Oracle's] Compass Methodologies." The university pointed out that Oracle's own implementation methodologies required proper status reports. "Certain Oracle employees finally admitted they were not familiar with Oracle Methodologies and were implementing the project the way they thought they should."

The complaint also contains the charge that Oracle "continually rotated staff in and out of the BTI project, creating confusion on task and project duration..." Over the course of 12 months, 129 different people worked on the project, some offshore. Offshore staff "often confused BTI with other projects they were working on for other clients," the complaint said.

As relations deteriorated, a series of meetings took place between July and September 2010, with the school issuing an ultimatum at an Oct. 25 meeting to address the project's shortcomings. The meeting ended with the school concluding the conflict was unlikely to find "an amicable resolution."

In its response, Oracle charges that the university engaged in "scorched earth litigation strategy as a pretext to blame Oracle for its own leadership failures."

"Oracle complied with, performed and satisfied its obligations under the Contract," it said. It also performed "additional work" outside the contract for which it has not received payment.

As a footnote to the dispute, there's confusion over Oracle's name and place of charter. Oracle's response said the correct party to sue was Oracle America. It says Oracle merged with and into Sun Microsystems on Feb. 15, 2010, with Sun "the surviving corporation," which then changed its name to Oracle America, a Delaware-chartered firm. Montclair State named Oracle USA as the target of its suit, a Colorado-chartered corporation.

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About the Author(s)

Charles Babcock

Editor at Large, Cloud

Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive Week. He is a graduate of Syracuse University where he obtained a bachelor's degree in journalism. He joined the publication in 2003.

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