Oracle Sued Over Alleged ERP Project Cost Overruns

Montclair State University, a leading unit of the New Jersey higher education system, is suing Oracle over an ERP system implementation intended to enable a greater degree of student and faculty self service for many academic and business processes via a university portal.

The Montclair complaint was filed last week in U.S. District Court for the District of New Jersey in Newark, N.J., and claims the university will experience $20 million in expenses beyond the planned cost of the project, said a university spokesperson. It has already paid Oracle part of the project's cost and will need an additional $10 million to finish it.

Oracle was chosen in 2009 to implement PeopleSoft in support of the project, named the Bell Tower Initiative for the school's landmark tower. The university contracted for $4.3 million in software and technical support along with a $15.75 million fixed fee implementation agreement.

Montclair State claims it made repeated demands for a better accounting of progress on the project. The parties disputed the degree of progress in a series of meetings through the summer of 2010. Oracle sought $8 million beyond the fixed fee agreement to finish the project, and when the university balked, it acted on a statement that it would walk away; the Oracle consulting team walked away last October.

A Montclair State spokesperson said the complaint offers a long list of issues that caused the parties to part ways. The spokesperson also said Oracle attempted to implement two different project management systems in the course of the project, both of which failed, and didn't log or address university complaints about the implementation.

In any ERP implementation, both parties carry large responsibilities as demonstrated by numerous lawsuits between implementing consultants and enterprise customers. The Montclair case, however, is one of the largest disputes between a public institution and an ERP vendor. Oracle has not yet filed a response to the complaint and an Oracle spokesperson said, "We decline comment."

Montclair is the second largest institution, after Rutgers, in the New Jersey public higher education system with more than 18,000 students. The Montclair State website touts the coming "Bell Tower Initiative" as a replacement for the current business systems "with a self-service, web-based system that is user-friendly and offers many new features and functions. The system will enhance our ability to manage information, standardize processes, and improve compliance."

According to the website, "The initiative touches every operation in the university including finance, human resources, and student administration."

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