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US Sues Oracle Over Alleged Overcharging
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."
Glad to see the govt. fighting to get more for our tax dollars, not just sitting there getting bilked by dishonest vendors.
get MySQL!
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.
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.
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.
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.
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.
And now, we can add $10m more for the costs associated with a long, protracted trial, and all the associated appeals.
I use irony whenever I can, but my shirts are still wrinkled...
They demanded, and Oracle agreed. On paper.
I, as a customer, can be as demanding as I want.
I expect my government to be very demanding of the suppliers it uses.
The supplier is free to choose not to do business with a demanding customer.
Is it so hard to understand?
And the worms ate into his brain.
"This is why most companies don't like dealing with the government"
[citation needed]
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.
Because if Oracle had contracts with a private corporation to give them the best deals, and that private corporation found out that Oracle wasn't holding up to their end of the bargain, they would never sue, right?
It's only because they were dealing with the big evil government that they had to actually stick to their contractual obligations.
And if the government was found to be overcharged without doing anything about it, citizens would never object, right?
The government has the reputation for never being efficient or controlling costs. Whenever the government tries to become more efficient and more cost effective, we need to encourage that! (Assuming it doesn't mean taking away our rights)
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.
Don't you understand? Here is how it works:
Because the government is intrinsically evil, anything it does that a corporation doesn't like is communism. Therefore, their deal with Oracle couldn't possibly be legit, even if Oracle signed.
However, because the government is intrinsically wasteful, any example of it getting a poor deal is just further evidence of how evil and wasteful it is...
You can see how this, completely internally consistent, line of reasoning leads to governance that is both inefficient and grossly expensive. Pity most of the people who articulate it aren't joking...
There's people who haven't done much business with Oracle. Some of them haven't been screwed yet.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
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, 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.
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.
Apocalypse Cancelled, Sorry, No Ticket Refunds
Who says the US government is a preferred customer?
My money is on the contract Oracle negotiated that said the US Government would get discounts that were as good or better than any other Oracle customer's discount.
This isn't the gov strong arming Oracle, this is Oracle signing a contract and then looking for every way they could to avoid doing what they agreed to do.
Generally we call that a "breech of contract", and there are serious legal ramifications whether the US government is involved in the contract or not.
Or, to put it more simply, fucking read you dumbass.
Security is mostly a superstition... Avoiding danger is no safer in the long run than outright exposure. - Helen Keller
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.
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.
Custom electronics and digital signage for your business: www.evcircuits.com
Sorry, I just can't believe Oracle would overcharge anybody ;-)
Everything I write is lies, read between the lines.
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."
"Why...are...pants...crushing....me."
"Well, you read the deal, didn't you? You're wearing them on a Sunday. It's a Breech of Contract."
Ba-dum-cha!
I don't believe in time. It's a grand conspiracy designed to sell watches.