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US Sues Oracle Over Alleged Overcharging 164

CWmike writes "Oracle is being sued by the US government for allegedly overcharging it by millions of dollars, according to documents on file in US District Court for the Eastern District of Virginia. The US General Services Administration's Schedules are supposed to provide discounts that are as good as or better than that given to the vendor's most favored customers, the complaint states. However, Oracle employee Paul Frascella, who joins the government's action, learned that Oracle was finding ways around the GSA restrictions in order to give commercial customers even deeper discounts, according to the complaints. In one alleged practice Oracle was said to be 'selling to a reseller at a deep discount ... and having the reseller sell the product to the end user at a price below the written maximum allowable discounts,' the complaint states. Overall, Oracle's actions cost US taxpayers 'tens of millions of dollars,' it adds."
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US Sues Oracle Over Alleged Overcharging

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  • Re:Wait a minute (Score:5, Informative)

    by CraftyJack ( 1031736 ) on Wednesday June 16, 2010 @04:56PM (#32595020)
    Yes. One of the stipulations of having a GSA schedule contract is that the government gets Most Favored Customer [] pricing. Them's the rules, and you break them at your peril.
  • Re:Wait a minute (Score:3, Informative)

    by nairnr ( 314138 ) on Wednesday June 16, 2010 @04:57PM (#32595026)
    Other way around... They were giving better discounts to other clients, without offering the Govt the same deal. They don't want others to pay more, but as a preferred customer they should be getting equivalent discounts.
  • Re:Wait a minute (Score:5, Informative)

    by blair1q ( 305137 ) on Wednesday June 16, 2010 @04:57PM (#32595036) Journal


    There's a law called the "Truth in Negotiations Act", "TINA" for short, which essentially states that when bidding on a government contract, if you can do the job for less than you bid it for you have broken the law. The bid discloses estimated profits, and the government goes along with varying rates of profit, but if your profit is bigger than you disclose, and it's because you put in a cost item that your company (not just the department doing the bidding, to prevent firewalling to induce uncertainty) knew it could do cheaper (not that it was doing it cheaper), then you are deemed to have ripped off the government knowingly.

    I'd love to see a similar law passed for consumer transactions.

  • Re:Wait a minute (Score:3, Informative)

    by mangu ( 126918 ) on Wednesday June 16, 2010 @05:19PM (#32595358)

    when bidding on a government contract, if you can do the job for less than you bid it for you have broken the law

    WTF? The guiding principle in government contracts should be to get the lowest practical price, not the lowest theoretical price. Otherwise the result would be that many companies will not care to bid for the government.

    My first job was in detailing cost estimates for a company that custom built heavy mechanical equipment. One rule there was that for any government job the cost would be higher. There's so much paperwork involved in government jobs that it's impossible to do it at the same price you charge private companies.

  • Re:Good! (Score:3, Informative)

    by clarkkent09 ( 1104833 ) * on Wednesday June 16, 2010 @05:20PM (#32595368)
    I hope you are being sarcastic in your praise of the government. Yes of course they should fight to get more out of our tax dollars but we are talking about a few million here, when the federal government

    - loses $25 billion (Yep, lost as in nobody knows what happened to it. Yep, $25 billion)- google "Unreconciled Transactions Affecting the Change in Net Position" section in the Treasury Dept financial report
    - wastes $60 billion [] annually on Medicare fraud. Just wait until Obamacare kicks in.
    - spends at least $90 billion on programs that are "ineffective, marginally adequate, or operating under a flawed purpose" [](partial audit by the white house)

    ..etc etc this is just the first 3 examples I found on google with easily linkable references. Here's some more [].

    Even assuming that ALL of the hundreds of government agencies [] and spending programs [] are necessary, there are 100s of billions wasted annually just through inefficiency and carelessness with which those programs are managed.
  • Re:Wait a minute (Score:3, Informative)

    by budgenator ( 254554 ) on Wednesday June 16, 2010 @06:38PM (#32596372) Journal

    Insurance companies typically have a contractual agreement to pay the healthcare provider a percentage of the areas "Usual And Customary" fees. The insurance determines what the UAC should be by averaging the areas billed fees, so if I'm healthcare provider and I want to receive $80.00 for a procedure, I charge $100.00 for it to get the $80.00 paid to me. The magic word "accepted" mean the healthcare provider has to eat the $20.00 as a write-off, with out it the patient pays the $20.00. If your a cash patient ask for a discount, you'll be surprised how many times the provider will extend a 20% courtesy to you.

  • Re:Wait a minute (Score:3, Informative)

    by Anpheus ( 908711 ) on Wednesday June 16, 2010 @07:09PM (#32596652)

    The problem with the $500 toilet seat argument is that occasionally a contract over-runs cost, and they approach the government and say, "We ran over cost by $X, and behind schedule by Y days." The government and the supplier have to amend the contract's line items. But let's say your contract is to remodel an entire facility, including toilet seats. Any one component of that whole contract could have cost a $49,000 over-run. Maybe the whole contract was over $1,000,000 and $49,000 ain't that much (respectively), but they put the way it was itemized was a bit strange and they included a very specific item with a bunch of general or complex items. Like, they put in line items for the cost to remodel the entire cafeteria as "dining facility, $100,000", but they itemized the bathroom more specifically, with items like "toilet seat: $10" and "sink: $150" or whatever. And due to this weird use of line items, there are only 100 line items for the whole contract.

    The government will ask the supplier for their total expenses in labor and items, which they have to provide per the contract, and then the government will apply the $490 over-run to every item on the contract.

    Voila: $500 toilet set, $640 sink, and yet the cost of the whole dining facility only increased by $490 as well, or .49%.

    Snopes has explained this in detail in the past. The government applies a straight increase to every item on the contract, because the many-to-many relationship between a supplier's costs and the items on a contract make it difficult or impossible to assign proportional increases. Result: $100 ballpoint pens, $500 hammers, and $1000 toilet seats. Yet on the same contract, vastly more expensive items were increased by the same amount.

  • Re:Right... (Score:3, Informative)

    by geekoid ( 135745 ) <dadinportland&yahoo,com> on Wednesday June 16, 2010 @07:39PM (#32596916) Homepage Journal

    Oracle is breaching a contract. It's really that simple. The government is doing right.

    " More citizens have been killed by their OWN government, than by foreign invasion"

    nonsense. Stop being stupid.

  • Re:Wait a minute (Score:3, Informative)

    by guruevi ( 827432 ) <evi AT evcircuits DOT com> on Wednesday June 16, 2010 @10:28PM (#32598062) Homepage

    That however doesn't seem to apply for most companies though. Dell's systems are more expensive for government than list price for home users, Microsoft licensing is more expensive compared to enterprise customers. All of it is just a difference in the way they package the products and they simply won't offer the cheaper option to government customers and vice versa. Oracle just made a mistake in packaging their products for government customers.

    And it's understandable that companies do this. If you sell something to government, you have to invest in lobbyist, sales people and bidding then when you do actually sell something you have to wait months if not years for payment being sent from office to office, waiting for signatures, getting lost, ... much like how Vogon's are described.

  • Re:Wait a minute (Score:4, Informative)

    by guyminuslife ( 1349809 ) on Thursday June 17, 2010 @02:48AM (#32599316)

    Generally we call that a "breech of contract"

    Impromptu feghoot:

    I found a pair of pants in a store that were very comfortable and stylish, and immediately appealed to my tastes. I took them to the front counter, where the shop owner was checking out the customers, and he said, "Okay, I'll sell you these pants very cheap, but you must agree to never, ever wear them on a Sunday." Without even really thinking about it, I signed the form, and took the pants home.

    Well, I often wore them throughout the week, and I got a lot of compliments about the pants. They quickly became a staple of my wardrobe. But I hadn't worn them on a Sunday yet---so one day, figuring the old shopkeeper wasn't really going to hold me to it if I put the damn things on any day of the week I pleased, I pulled them out of my closet and got into them.

    Just as soon as I had zipped up the zipper, suddenly, the pants started getting tighter. At first it was just uncomfortable, and I wondered if they had shrunk in the wash. But then it became painful, and I could barely move or breathe. My life flashed before my eyes. I felt like I was having the life literally squeezed out of me.

    I stumbled over to the phone and called the store---which was fortunately open on Sundays. The owner picked up the phone. "Hello," he said.

    "Pants...too...tight...." I wheezed.

    "You're going to have to cut them off," he said flatly. "Don't expect me to help. It's Sunday."


    "Well, you read the deal, didn't you? You're wearing them on a Sunday. It's a Breech of Contract."


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