[sws_grey_box box_size="690"]SUMMARY - Oracle v Oregon, Oregon v Oracle expose some familiar underlying issues with public sector technology contracts. [/sws_grey_box]There really is something about the healthcare market that seems to invite trouble. Over the past couple of weeks, mounting tensions between Oracle and the State of Oregon have finally gone public with both sides launching claims and counterclaims against the other in the latest of a long line of Obamacare-related IT disputes across the industry.
But the Oracle v Oregon case is particularly interesting for a number of reasons.
First up is simply the high-profile nature of the dispute which has grabbed national, indeed international attention.
Secondly, Oracle has taken the fight to the client, landing the first punch by filing a lawsuit against the state.
Finally, the whole thing raises once again the thorny question of what happens when political agendas crash into technology ones?
Who's done what?
Let’s remind ourselves of the state of play to date.
Technology problems had beset Cover Oregon's online healthcare exchange with the web portal where consumers were to purchase health insurance never going live after open enrolment began on 1 October 2013. The state used paper applications to allow Oregonians to access health insurance subsidies through the new federal program.
In March 2014, Oregon State dismissed Oracle, the lead website developer for Cover Oregon, followed in April by the axing of the exchange, despite spending $248 million on it, and a decision to use the federal system instead.
Oracle contends in a 21-page complaint that it is still owed $23 million by Cover Oregon under its contract. The state is reported to have initially committed only about $7 million for Oracle software, but the eventual payments to Oracle topped $130 million.
The company argues that hundreds of thousands of citizens were enrolled in health insurance using the software built by Oracle and other companies and that customer service representatives and health insurance agents were able to use that software to enrol consumers in a back-office capacity, but that the system was never made available for consumers to enrol directly on their own.
The firm also alleges that Oregon state officials privately requested Oracle's help to fix their healthcare enrolment system while engaging in a campaign of "constant public slander" against it:
They could have done two things in the face of those press reports: (a) own up to the management and technical challenges they had encountered and commit to a plan for resolving them; or (b) blame someone else. They chose the latter and they fixed their sights on Oracle.
While flogging Oracle publicly, Cover Oregon continued privately to ask for Oracle’s help. ... Oracle gave that help for many months, in spite of the public excoriation, because it was committed to helping Cover Oregon complete the project and because Cover Oregon repeatedly promised to pay Oracle for its services.
A major contributor to the failure of the project, according to Oracle, was Oregon’s decision not to appoint a systems integrator:
That decision was akin to an individual with no construction experience undertaking to manage the processes of designing and building a massive multi-use downtown skyscraper without an architect or general contractor.
(Cover Oregon did later sign an $18.4-million contract with Deloitte Consulting LLC to serve as the systems integrator to manage the move over to the federal exchange.)
The Zombie IT project that makes the case for digital (diginomica.com)
For its part, Oregon has come out fighting, with a 126-page lawsuit containing some astonishing allegations that raise the stakes significantly, such as accusing the supplier of alleged crimes such as wire fraud and invoking Oregon’s civil Racketeer Influenced and Corrupt Organizations Act,.
The Oregon suit claims that Oracle America, Inc. "fraudulently induced" the state into contracts worth hundreds of millions of dollars for Oracle products and services that failed to perform as promised. It alleges that Oracle 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 total, according to the law suit’s accusations, Oracle billed the State of Oregon and Cover Oregon some $240,280,008 in false claims which it argues:
amounts to a pattern of racketeering activity that has cost the State and Cover Oregon hundreds of millions of dollars.
The suit cites six Oracle employees personally, including company President and Chief Financial Officer Safra Catz.
One twist in the tale is that Oregon claims to have evidence from an Oracle whistleblower to support its claims. The complaint cites information from an unnamed former employee of the firm that Oracle discouraged the hiring of an SI and engaged in a concerted effort to persuade the state not to do so on the basis that this would just cause delay.
All of this will have its days (months, weeks, years?) in court of course, but it’s interesting again to see a public sector case where many of the allegations of blame and counter-blame come back to accusations around poor project management and political agendas getting in the way.
In its lawsuit, Oracle points out, First Data, a company hired by the state to analyze what went wrong with the exchange project:
attributed a large part of the problems to Cover Oregon's mismanagement of the project.
It also cites indecision on the part of the State agencies:
At one point, then interim director of Cover Oregon, Dr. Bruce Goldberg, confided to Oracle personnel that getting Cover Oregon personnel to make decisions was 'like pushing a rope.'
And it accuses Oregon governor John Kitzhaber of having his own agenda:
The failure to deliver a working citizen self-service portal on Oct. 1, 2013 was a political embarrassment for Gov. Kitzhaber, who immediately looked for places to blame.
Indeed Oracle goes further and suggests that the site was not live in February this year for political rather than technical reasons. In a letter from Safra Catz to Cover Oregon interim director Clyde Hamstreet and state CIO Alex Pettit that was presented to the US House and Energy Committee in June, prior to the lawsuits being filed, the Oracle CFO argued:
Cover Oregon executives have stated to Oracle that the application functionality is sufficient to support individual enrolment. However, Cover Oregon has not agreed to give individuals direct access to the application. Thus Cover Oregon, not Oracle, made the decision to keep the exchange closed to individuals even though the functionality has been delivered by Oracle.
In its presentation to the Committee, Oracle went on to allege:
Oracle can only conclude that the Governor’s unwillingness to release the website is because doing so doesn’t fit with his re-election strategy of blaming Oracle for his own mistakes.
Well I’m not getting caught in the cross fire between these two legal teams, so further comment on the specifics relating to Oregon would be inappropriate, other than to say that the outcome will clearly be watched very closely, both in the US and overseas.
But suffice to say, enough of the claims and counterclaims have an unfortunately deja ecoute quality to them to suggest a depressing familiarity in the underlying causes of such disputes.
Here in the UK, the legal bills are still coming in from the fall out of the doomed NHS National Programme for IT which saw billions of pounds of taxpayers money poured away on a politically-motivated ego trip that failed to deliver the technological revolution it sought.
In that case, it was a program that was badly scoped, badly project managed and badly overseen by stakeholders who lacked the necessary technical capabilities. It took then Prime Minister Tony Blair two hours to commit to the single largest IT programme the European public sector; it took over ten years for the UK government to stop pursuing his vanity project.
That the Obamacare tech roll out overall, across the US, was a nightmare is surely a matter of record. The specific reasons for failure in individual states may vary, but there was a top-down set of shortcomings that ended up being cruelly exposed.
In the UK, we’ve largely failed to learn the lessons from the NHS debacle, as nightmares like the Universal Credit IT roll-out indicate. Whether the US public sector can draw learnings from the wider Obamacare mess remains to be seen.
Disclosure: at time of writing, Oracle is a premium partner of diginomica.