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Our Opinion: Oracle the winner in settlement

Published Sept. 27, 2016 -


COURTESY PHOTO: WIKIPEDIA/ORACLE - Executive Chairman and Chief Technology Officer Larry Ellison co-founded Oracle, a software company that Oregon will be even more enmeshed with after a legal settlement over the failed Cover Oregon.You could almost hear the champagne corks popping in the Oracle executive suites last week after Gov. Kate Brown announced the state and the software giant had settled a lawsuit over the Cover Oregon website debacle.

Not only did Oracle come out of the deal having to spend almost no money, relatively speaking, it also struck a deal that likely would require Oregon to invest hundreds of millions more dollars to make full use of supposedly free software that the company offered in compensation for never delivering a functioning health-care website.

The lawsuit’s settlement may have political value for Brown’s election campaign, since it gets an embarrassing issue out of the way. But when the details are examined, it’s clear Oracle came out the clear winner in these negotiations, while Oregon receives very little beyond its legal costs.

If you think that’s an overstatement, just consider the raw numbers.

Between 2011 and 2014, Oregon spent $300 million in federal funds and millions more in state dollars on the health-care website for which Oracle was the lead contractor. After the project fell apart and the state had to spend millions more to connect instead to the federal health-care exchange, the state filed a lawsuit accusing Oracle of fraud and racketeering and seeking about $6 billion in damages.

So after blowing hundreds of millions and claiming damages for billions of dollars, what will Oregon receive for its trouble and its wasted taxpayer money? A mere $10 million in education grants and $25 million to cover attorney fees the state incurred.

The rest of the settlement, which Brown and other state officials touted as the heart of a supposedly $100 million deal, comes in the form of free software from Oracle. However, as reported by the Portland Tribune’s Nick Budnick last week, the state would need to spend as much as half a billion dollars on technology upgrades to be able to fully use the software. And because the deal with Oracle has a six-year time limit, the state soon enough would find itself spending large sums of money once again with Oracle.

So, Oracle walks away financially unscathed and has gained the opportunity to do even more business with the state, likely making its $35 million back within five years after the six-year agreement ends. As anyone who deals with technology projects understands, once a large organization commits to a particular software and builds systems around that product, it becomes very difficult to switch to a different vendor.

The settlement announced by Brown last week follows articles this year in the Portland Tribune that showed Oracle’s own employees had grave doubts about the quality of their work in Oregon. Surely, the company, as well as the state, had made mistakes along the way. The cash portion of the settlement should have better reflected their shared responsibility.

It’s true that the federal government might have been tempted to claim its due if Oregon had received more cash. It appears that state officials intentionally structured the settlement to avoid that outcome.

As it stands, though, the deal looks more like a political decision than a legal one. Brown is running for election to the office she inherited from former Gov. John Kitzhaber. She also inherited the Oracle lawsuit and the failure of the Cover Oregon website. Rather than carrying the battle on through the November election and potentially seeing if Oracle would blink before trial, the governor's office decided to cut its losses and eliminate a suit that had been a favorite subject of Republican attacks.

This is the same sort of political calculation that Kitzhaber’s team made when it ditched Oracle in favor of the federal exchange in 2014, and then asked Attorney General Ellen Rosenblum to file the lawsuit. Two years later, in the midst of another election year, Oregonians are finally learning that either the state had a lousy case, or that getting elected is more important than trying to recoup hundreds of millions in squandered dollars.

Either way, it’s a particularly unsatisfying end to an episode that already had undermined confidence in the basic competence of Oregon government.