Auditor raps Oracle license deal for state of California

Computerworld - An exclusive six-year, $95 million contract between the state of California and Oracle Corp. for database software has failed to produce any project savings and may have been done illegally, according to a recent report by California State Auditor Elaine M. Howle.

Last May, the state signed a deal to provide 270,000 employees with access to Oracle's Enterprise Edition 8i database in the hope that it could save as much as $111 million over the life of the contract. The thinking behind the initiative, dubbed an Enterprise License Agreement, was that purchasing the software from a single source would enable discounts and cuts in administrative costs. However, the move caused a flurry of criticism from some state legislators (see story).

The lawmakers claimed that the Department of General Services (DGS), which, along with the Department of Information Technology, was most involved with the purchase, was legally bound to notify them of any purchase made for more than $500,000.

Stoking the flames further, Howle's office is now claiming that no state departments have taken advantage of the new agreement, and the reality will be that by June the state will have spent $17 million with nothing to show for it.

Howle has also suggested that a court may render the contract invalid because it didn't comply with state regulations for noncompetitive bidding. According to the auditor's report summary, if in fact the contract is void and not enforceable, then there is the possibility that Oracle and Logicon Inc., now known as Northrop Grumman Information Technology -- the reseller that handled the deal -- will be liable to repay the state $52.3 million.

According to the report, however, the DGS disagrees that the deal violated state requirements for sole-source contracts. In January, a spokesman for the department said the total package was worth about $126 million and said notice wasn't given because of time constraints and because the contract was expected to save the state money on software already in use.

Howle also suggested that the state attorney general be consulted "on how to protect the state's best interests," and called on the DGS to work with the attorney general to analyze the Enterprise License Agreement and any "side agreements between Oracle and Logicon" and the "potential legal issues that this audit has identified."

In fact, the report bluntly states that the DGS officials who negotiated the deal lacked experience.

"General Services' negotiating team was inexperienced and unprepared, with no expertise in software contracts and no in-depth knowledge of Oracle's business and