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Government Oracle Databases The Courts United States Your Rights Online

US Sues Oracle Over Alleged Overcharging 164

Posted by timothy from the who-does-a-gorilla-sue? dept.
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 More

US Sues Oracle Over Alleged Overcharging

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  • They are suing Oracle because Oracle gave someone else a better price?

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

      by ceejayoz ( 567949 ) <cj@ceejayoz.com> on Wednesday June 16, 2010 @03:52PM (#32594950) Homepage Journal

      They are suing Oracle because Oracle gave someone else a better price?

      They are suing Oracle because Oracle gave someone else a better price despite being contractually bound not to.

      Don't like it? Don't agree to it.

      • Re: (Score:3, Informative)

        by nairnr ( 314138 )
        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.

        • My company sells a healthcare related product (my opinions are my own and not the company's, yadda yadda). We have a similar obligation to the government, we have agreed to give them the best possible price, and we may never sell it for less than that amount without discounting the price sold to the government as well.

          A data entry error a few years ago led to a major distributor getting a trivially better price (somthing like $0.01) than the government. Two different promotions overlapped with each other

      • I'd be willing bet big money that Oracle isn't the first. Being a former sales engineer in the enterprise software space, there are some big discounts that can be implemented for certain deals that can make or break a quarter.

        Interesting how an Oracle employee is a whistleblower in this case.

      • Re: (Score:2)

        by maitas ( 98290 )

        According to Safra Catz they did this out of stupidity ""Integrity matters... Don't be afraid to look stupid over integrity."

        http://www.examiner.com/x-43195-SF-Technology-Examiner~y2010m5d11-Oracle-President-Safra-Catz-shares-wisdom-at-PBWC-Annual-Conference [examiner.com]

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

      by CraftyJack ( 1031736 ) on Wednesday June 16, 2010 @03:56PM (#32595020)
      Yes. One of the stipulations of having a GSA schedule contract is that the government gets Most Favored Customer [wikipedia.org] pricing. Them's the rules, and you break them at your peril.

      • Re: (Score:3, Informative)

        by guruevi ( 827432 )

        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 so

        • Re: (Score:2)

          by mcgrew ( 92797 ) *

          Did you actually read the books, or just watch the TV series? because if you were a reader you'd know that it isn't Vogon's, its Vogons. And yes, I know that the book was an adaptation of the radio play, but that's not important.

          I wish more people would read more books. Too much internet gives you some bad habits.

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

      by blair1q ( 305137 ) on Wednesday June 16, 2010 @03:57PM (#32595036) Journal

      Yes.

      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:4, Interesting)

        by OpenGLFan ( 56206 ) on Wednesday June 16, 2010 @04:15PM (#32595290) Homepage

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

        I can't see why this isn't the law for medical care. If a procedure costs $50 to do, and you charge $75 for insurance company X or $400 for an uninsured person, then you should go to jail.

        • ok so this is the second most insightful post in years...

          preferred customer status is bullshit... everyone should be paying the same price for the same product (at the same time)....
          treat it like the equity markets handle things.

          that said, they could also argue they can't do the job for the government for a better price. They are only able to offer some small company a break because they can afford to eat that loss in exchange for service contracts and future sales... the government case is the future sale

          • preferred customer status is bullshit... everyone should be paying the same price for the same product (at the same time)....

            Right, just like when you buy a car?

            There is a reason why software companies employ armies of salesmen - their principle job to sell their widget for as much money as they can get for it. A salesman does not transact a product - he sells it just like a stock is traded on an exchange. Supply, demand, emotion all apply for sales transactions. You might find a better price elsewhere.

        • Re: (Score:3, Informative)

          by budgenator ( 254554 )

          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 patie

        • Or for legal services.

      • Re: (Score:3, Informative)

        by mangu ( 126918 )

        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. T

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

          by iceborer ( 684929 ) on Wednesday June 16, 2010 @04:45PM (#32595760)

          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.

          The guiding principle is that the government get the best combination of price, schedule, and quality. There is no theory in the TINA pricing. The company is required to say "our costs will be X and our profit Y to deliver Z to you when you want it." The government "allows" only a certain amount of profit on a contract. If you make more, perhaps a component's cost goes down hugely in the market, you are required to go back to the gov't and allow them a rebate on their cost. If you make more because you fudged the numbers, you get barred from federal contracts and may also end up behind bars. It is for these exact reasons that many companies don't do business with the government. I should also mention (having some experience in the process) that the companies still manage to hide an awful lot of "excess profit" and I don't feel the need to cry for them.

          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.

          Don't have a GSA Schedule Contract [fedmarket.com], then. Trust me, those vendors who have them are happy to have one, but not all vendors/products work well with them. I think you're confusing contracting with the government in general with having a Most Favored Customer agreement with them. Not all (not most?) government contracts have such a clause.

          • Re: (Score:2)

            by mangu ( 126918 )

            Don't have a GSA Schedule Contract, then. Trust me, those vendors who have them are happy to have one, but not all vendors/products work well with them.

            Of course they are. Who wouldn't be happy to sell a toilet seat for $500? [google.com]

            But if they were as honest as my former employer they would refrain from getting those contracts instead of doing whatever they do to sell stuff to the government. The fact is that this "Truth In Negotiations Act" is anything but. The way to circumvent it is to create new products, that

            • Re: (Score:3, Informative)

              by Anpheus ( 908711 )

              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 (respecti

              • Re: (Score:2)

                by mangu ( 126918 )

                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."

                I've been there, done that, and that's not the way it goes.

                When a government contract is over cost and behind schedule it's because somenone found a regulation no one had realized it existed.

                Something like "this should be painted in Munsell 55 grey" [wikipedia.org]. The part had been painted in exactly that color, but the paint supplier didn't have the paperwork proving that his paint wa

              • 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.

                This is the part I don't follow. Using your example the overrun was 4.9%, why not just multiply every line item by 1.049 and be done with it. The dining facility would have a line item cost of $104,900, the toilet seat $10.49, a ballpoint pen $1.05. Prices look sane and the numbers come out fine (+/- a few pennies due to rounding).

                • Re: (Score:2)

                  by Anpheus ( 908711 )

                  Because the government realizes that each item didn't proportionally increase in price, etc, etc. It's just a dumb accounting thing. That's all. Accounting for large projects like this is always prone to issue, because of things like I said where, well, how finely grained do you sell the items and labor? Do you go down to the toilet seat level, or do you go up to the jet engine (or whole plane) level?

            • You can price it any way you want, subject to competition from other companies. At my last job the government was a large customer of ours, and they got a price less than a third of what we were charing almost anyone else. The reason being most private companies were buying a tenth the quantity and there are a couple other companies that will manufacture a similar product so we had to cut our margin to the bone.

              I'm sure the government wastes a lot of money, but I assure you that in many cases their purcha

      • Re: (Score:2)

        by Rakishi ( 759894 )

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

        Apparently you don't understand capitalism, how sad. Ignoring various other problems, seriously I could go on for pages, you'd kill investment in any remotely risky company. Congratulations. Have fun learning Chinese in 20 years. High risk requires high profits in whatever investment actually succeeds.

        Let's say a group of individuals invests in into twenty new cutting edge small companies with revolutionary products. Let's say it's startups. Of those twenty, nineteen fail miserably and they lose all investm

        • Re: (Score:2)

          by toriver ( 11308 )

          ... and high risk means having the balls to go bust when you fail instead of running to Mommy State for a corporate handout, like the financial industries. Or lobbying them for laws to protect your business model like the entertainment industries.

          But it also means that someone else gets to do what you do but cheaper and out-compete you later on - except that is a feature the free market which is the antithesis to capitalism and profit because profits is a margin that you need to "justify" to your customer b

          • Re: (Score:2)

            by Rakishi ( 759894 )

            You apparently are insane and have no knowledge of economics much less what capitalism and free market actually mean (hint: they're not mutually exclusive and pretty much tied together). Also, another hint, the United States is not a purely capitalistic society. So I don't see much reason to talk to you.

            I will leave you with one question, how did that other competing firm will acquire the initial money to enter the market? And why would anyone provide it to them?

            • Re: (Score:2)

              by toriver ( 11308 )

              The ideal free market is a theoretical construct where an infinite number of customers have perfect knowledge about the products of an infinite number of suppliers. In this though-scenario, all goods and services must be sold at cost simply because a profit margin is a margin a competitor can undercut.

              Profit is therefore a sign of an imperfect market. Which basically is what we must have, since the perfect free market is merely a theoretical construct. Suppliers and customers are finite and information is i

      • Re: (Score:2)

        by geekoid ( 135745 )

        You can make the same demands for any vendor you want. The vendor doesn't have to accept them and can take their business elsewhere.

        The government spends a lot of money, they can make demands like that. Just like any large organization
        can.

    • In order to get on the GSA sched's, you have to provide a price for your product, to the gov't that is considered fair. Otherwise, this happens.

    • Re: (Score:2)

      by mcgrew ( 92797 ) *

      If you live in the US or are a citizen, that's YOUR money Oracle is stealing and you're defending Oracle?

  • Good! (Score:5, Insightful)

    by timeOday ( 582209 ) on Wednesday June 16, 2010 @03:45PM (#32594836)
    Glad to see the govt. fighting to get more for our tax dollars, not just sitting there getting bilked by dishonest vendors.

    • Re: (Score:3, Informative)

      by clarkkent09 ( 1104833 ) *
      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 [senate.gov] annually on Medicare fraud. Just wait until Obamacare kicks in.
      - spends at

      • You had interesting information in your post, but when I saw the word "Obamacare", my Glenn Beck automated filter kicked in. Try to keep the useless talking points phrases out of it next time, and perhaps your information won't be lost in the noise.

        • I don't watch Glenn Beck. I didn't realize Obamacare is a dirty word now, that's what a lot of people call it:

          http://www.cbsnews.com/8301-503544_162-20007679-503544.html [cbsnews.com]
          http://www.time.com/time/magazine/article/0,9171,1914973,00.html [time.com]
          http://online.wsj.com/article/SB124208383695408513.html [wsj.com] ...

          • Perhaps not a dirty word, but I've never heard it used in a positive or respectful fashion. Perhaps that's just my own bias from observation, I stand corrected. In any event, I did appreciate the information in your post...

          • Re: (Score:2)

            by Anpheus ( 908711 )

            Calling something Obamacare, Hillarycare, etc, is a method of critiquing it and assigning a name.

            No one wants to fight "Universal Health Care". That sounds amazing! (That's not what we got in the bill, but sort of close enough.)

            But hey, call something Obamacare, when your constituents and supporters already dislike Obama, and the transitive property of dislike transfers over. Of course, to people who support the health care reform, they don't know why it's called Obamacare, because so many different pieces

            • Re: (Score:2)

              by toriver ( 11308 )

              Wonder what the opponents of "Obamacare" in the general public would say if it failed and they went to a private insurance company and got "Don't Care" instead... amazing how the Average Joe can be turned into a stooge for a lobby like that.

      • - 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

        That means the accounting did not add up, it probably does not mean that somebody got away with $25 billion in diamonds or something.

        - wastes $60 billion annually on Medicare fraud. Just wait until Obamacare kicks in.

        How much do private insurers lose to insurance fraud?

        - spends at least $90 billion

      • Note: I'm giving up the chance to mod in order to fact check.

        wastes $60 billion [senate.gov] annually on Medicare fraud.

        I was surprised by that figure - losing $60 billion to fraud on $600 billion (roughly) total spending? That's damn scary, and would mean that one dollar out of every ten was being paid out for fraudulent claims.

        Fortunately, I read the linked press release. The actual quote is:

        Fraud, waste and abuse in our health care system account for three percent of our total health care spending, costing Americans more than $60 billion every year.

        First,

        • Back when I was in the Air Force, eliminating "Fraud Waste and Abuse" were popular buzzwords for about a year or two. It was a federal government-wide initiative to eliminate, well, Fraud Waste and Abuse. No-one could ever really define (except in the broadest terms) what that really meant, but it made them feel like they were doing something to reduce government spending.

          It's entirely possible all the numbers cited in that article were pulled wholesale out of someone's ass.

          • Every government agency has an Inspector General who's job it is to seek out Fraud, Waste and Abuse. Of these folks that I have met, most are very sincere about their jobs.

      • You can't in one hand Bitch about government debt, and then in the next, go off about "its only 25 Million".. Seriously. Stop getting your math lessons from Politcal hacks on TV.

        I really can't afford to purchase this widget, but really, its only $50, and between my mortgage and student loans and credit cards, I have a huge amount of debt. Oh well, I guess I really don't need to bother plucking that extra $50 towards my debts.. Its too small to count..

      • Re: (Score:2)

        by mcgrew ( 92797 ) *

        I hope you are being sarcastic in your praise of the government.

        I hope he's not, because this IS praiseworthy. Are you one of those people who scold their child when he does wrong, but refuses to praise him when he does right? You sound like one, because that's just what you're doing here. Yes, there are inefiencies, waste, fraud, etc in government just like in any large organization, and the bigger any company, government, or whatever is, the more waste and fraud there will be.

        A good example is my local po

    • Re:Good! (Score:4, Insightful)

      by COMON$ ( 806135 ) on Wednesday June 16, 2010 @04:39PM (#32595682) Journal
      LOL, this is a RARE occurance. When I worked for the state there was an agency DAS that would use the collective buying power of the state to supposedly negotiate contracts for lower prices. The problem? They would not renegotiate so when cat-5 cables would drop in price, the vendor would be obligated to sell it for the price when it was negotiated. I was forced to pay $15 for a 10 ft cable in 2006 from CDWG. How do they get away with it? They show a cost savings for every purchase because at the time they negotiated the prices, everything was $20 a cable. So every time my agency would order a cable in 2006 DAS would show a $5 savings.The agency had lost all purpose and had turned into a huge money pit, they were more interested in pulling a profit than serving the interests of the agencies they were to serve. Yes they are not allowed to pull a profit, but nonetheless they did, they were caught and magically no agency was billed for mainframe time for 6 months or so...

      I am glad that there are some places where people are looking out for these kinds of things in the gov't though, it gives some bright hope that things can be done properly rather than as lazily as humanly possible.

  • That's still better than the tens of trillions of dollars US Politicians cost the taxpayer.

    • Re: (Score:2, Troll)

      by moosesocks ( 264553 )

      You're correct. Politicians are responsible for the allocation of the government's budget, the revenue from which is largely derived from taxes.

      Your point?

  • time to change to another Oracle product (Score:3, Funny)

    by kubitus ( 927806 ) on Wednesday June 16, 2010 @03:48PM (#32594880)
    get MySQL!

  • Right.... (Score:5, Insightful)

    by UrQUan3 ( 612520 ) on Wednesday June 16, 2010 @03:55PM (#32595014) Homepage
    In working for the government, we are routinely forced to use GSA for purchases. GSA is often far higher than the open market price. As a GSA contract is often good for over a year, prices that were good for a Core2 system last year are painful today. Modern systems aren't even available without circumventing GSA. GSA was intended for cutting grass and painting buildings, not IT purchases.

  • 'tens of millions of dollars,' (Score:3, Insightful)

    by HikingStick ( 878216 ) <z01riemerNO@SPAMhotmail.com> on Wednesday June 16, 2010 @04:06PM (#32595146)

    Overall, Oracle's actions cost US taxpayers 'tens of millions of dollars,'...

    And now, we can add $10m more for the costs associated with a long, protracted trial, and all the associated appeals.

    • Better that, than demonstrating that the law has no teeth; that would just open the flood gates to further abuse.

      Let's be clear: Oracle cheated the US. If the evidence is valid, they are not going to gain anything by dragging out the trial, if they are even allowed to. Hopefully the jugement will also include some hefty punitive damages as well, as this should be not be tolerated.

  • Has oracle not screwed anyone they do business with?

    No, not a simple troll. I have had dealings with them 4 times in my career ( thankfully been able to avoid them most of the time ) and they took advantage every single time.

  • This is not new. Here's an excerpt from Toronto Computer Leasing Inquire (Wiki): "On January 1, 1998, the Municipality of Metropolitan Toronto and its six lower-tier cities (Toronto, Scarborough, North York, Etobicoke, East York and York) were amalgamated into the single "megacity" of Toronto. In one of the new city's first official acts of business, computer equipment was leased for city councillors' offices from MFP Financial Services, at a value of $1,093,731. City staff have not been able to produce an
  • Most of the applications I see that use Oracle would work fine or better with an OSS database such as Postgresql or even SQLite. For some reason managers feel good about themselves when they spend gobs of money to run their app on Oracle. Sure there are apps that need Oracle's 24/7/365 top notch support, but most don't. In most situations, a catastrophe could be handled by importing yesterday's backup after a little downtime, saving bucks and DB management headaches.

    • Re: (Score:2)

      by dfetter ( 2035 )

      If you've experienced Oracle's "24/7/365 top-notch support," as you phrase it, you know there are certain problems it will not help you with. For example, there are known bugs, some of which cause what in Oracle jargon are called "600 errors," which means, "you're screwed, and you've lost data irretrievably." These bugs have remained unfixed for years, and no matter what kind of support you buy from Oracle, they will not fix them. Their green-eyeshade people have decreed that the cost of fixing them is n

    • Re: (Score:2)

      by durdur ( 252098 )

      Oracle's very first customer was a government agency (CIA). Many of these government customers have extremely large databases and take advantage of many features that competing databases lack or that are vendor proprietary and thus hard to replace (PL/SQL, data analytics, Oracle Text, XML support, etc). Not all Oracle applications are like this. But many are.

  • Be required to store all license info and be audited by any customers for the licenses they own. And provide free downloads for any software they own.

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