US Sues Oracle For Overcharging On Software Products

Dow Jones Newswires – By Jeanette Borzo and Jerry A. DiColo

The U.S. Department of Justice has joined a lawsuit against Oracle Corp. (ORCL) for allegedly failing to disclose discounts and overcharging the federal government by tens of millions of dollars.

According to the original suit filed in 2007 in the U.S. District Court for the Eastern District of Virginia, Oracle provided discounts to its “most favored customers” that also should’ve been provided to government agencies through an agreement with the General Services Administration, or GSA, designed to make routine purchases easier for federal government employees.

“If they were giving discounts to commercial customers, they should have extended those discounts to the government,” said DOJ spokesman Charles Miller. This procedure of updating the GSA when commercial discounts improved was written into the government’s contract with Oracle, which was in place from 1998 to 2006, he added.

The original suit was filed under the False Claims Act. In such cases, the plaintiff must disclose information about the suit to the government before filing it under seal. The government then investigates the case and can join the case or decide that it has no merit.

In April, the government filed a notice of election to intervene in the case, originally filed by former Oracle employee Paul Frascella. The government’s specific allegations will be known later–probably in August–when it files an amended complaint to the lawsuit. Once that complaint is filed, Oracle will have 30 or 45 days to respond, depending on how the court sets the case schedule…

Part 538.2 of the General Services Administration Acquisition Manual (GSAM) provides as follows:

538.270 Evaluation of multiple award schedule (MAS) offers.

(a) The Government will seek to obtain the offeror’s best price (the best price given to the most favored customer). However, the Government recognizes that the terms and conditions of commercial sales vary and there may be legitimate reasons why the best price is not achieved.

(b) Establish negotiation objectives based on a review of relevant data and determine price reasonableness.

(c) When establishing negotiation objectives and determining price reasonableness, compare the terms and conditions of the MAS solicitation with the terms and conditions of agreements with the offeror’s commercial customers. When determining the Government’s price negotiation objectives, consider the following factors:

(1) Aggregate volume of anticipated purchases.

(2) The purchase of a minimum quantity or a pattern of historic purchases.

(3) Prices taking into consideration any combination of discounts and concessions offered to commercial customers.

(4) Length of the contract period.

(5) Warranties, training, and/or maintenance included in the purchase price or provided at additional cost to the product prices.

(6) Ordering and delivery practices.

(7) Any other relevant information, including differences between the MAS solicitation and commercial terms and conditions that may warrant differentials between the offer and the discounts offered to the most favored commercial customer(s). For example, an offeror may incur more expense selling to the Government than to the customer who receives the offeror’s best price, or the customer (e.g., dealer, distributor, original equipment manufacturer, other reseller) who receives the best price may perform certain value-added functions for the offeror that the Government does not perform. In such cases, some reduction in the discount given to the Government may be appropriate. If the best price is not offered to the Government, you should ask the offeror to identify and explain the reason for any differences. Do not require offerors to provide detailed cost breakdowns.

(d) You may award a contract containing pricing which is less favorable than the best price the offeror extends to any commercial customer for similar purchases if you make a determination that both of the following conditions exist:

(1) The prices offered to the Government are fair and reasonable, even though comparable discounts were not negotiated.

(2) Award is otherwise in the best interest of the Government.

Acquisition Regulations

GSA is responsible for two acquisition regulations:

Federal Acquisition Regulation (FAR):  The FAR was established to codify uniform policies for acquisition of supplies and services by executive agencies. It is issued and maintained jointly, pursuant to the Office of Federal Procurement Policy (OFPP) Reauthorization Act, under the statutory authorities granted to the Secretary of Defense, Administrator of General Services and the Administrator, National Aeronautics and Space Administration. Statutory authorities to issue and revise the FAR have been delegated to the Procurement Executives in Department of Defense (DoD), GSA and National Aeronautics and Space Administration (NASA).

GSA Acquisition Regulation (GSAM) along with Acquisition Letters:  The GSAM incorporates the General Services Administration Acquisition Regulation (GSAR) as well as internal agency acquisition policy.  The rules that require publication fall into two major categories:

  • Those that affect GSA’s business partners (e.g., prospective offerors, contractors).
  • Those that apply to acquisition of leasehold interests in real property.  The Federal Acquisition Regulation (FAR) does not apply to leasing actions.  GSA establishes regulations for lease of real property under the authority of 40 U.S.C. 490 note.

Acquisition Letters

Document Number Issued Date Name/Format/Size
V-08-06 06/20/2008 Changes to Procedures for Conducting Fact-Finding in a Debarment/Suspension Case under GSAM Subpart 509.4
[Word – 18K]   [PDF – 191K]
V-09-08 08/28/2009 Personal Identity Verification and Credentialing for Contractors
<!–[–>[Word – 52K]   [PDF – 861K]
V-09-05 05/27/2009 Contractor Fraud Disclosure Requirements
[Word – 52K]   [PDF – 861K]
V-09-03 05/01/2009 Acquisition Planning
[Word – 52K]   [PDF – 861K]
V-09-02 05/08/2009 Posting of Justification and Approval Documents
[Word – 52K]   [PDF – 861K]
V-09-01, Supplement 1 04/09/2009 American Recovery and Reinvestment Act Implementation
<!–[Word – 52K]   –>[PDF – 861K]
V-09-01 04/09/2009 American Recovery and Reinvestment Act Implementation
[Word – 52K]   [PDF – 861K]
V-08-05 07/03/2008 Cooperative Purchasing – Acquisition of Security and Law Enforcement Related Goods and Services (Schedule 84) by State and Local Governments
[Word – 52K]   [PDF – 861K]
V-08-04 06/10/2008 Appendix D Amended 09-10-08 – Modification of June 08 Cutoff Memo
[Word – 109K]   <!–[PDF – 1,123K]–>
V-08-04 06/10/2008 Interagency agreements — Acceptance and Obligation of Funds
[Word – 109K]   [PDF – 1,123K]
V-08-03 04/14/2008 GSA Green Procurement Program
[Word – 71K]   [PDF – 299K]
V-08-02 04/07/2009 Implementation of DoD Class Deviation — New Specialty Metals Restrictions, Berry Amendment
[Word – 64K]   [PDF – 2,349K]
V-08-01 02/26/2008 Jurisdiction of the GSA Ombudsman on ID/IQ Contracts Awarded by GSA
<!–[Word– 62K]   –>[PDF – 157K]

Acquisition Library

Visit the Acquisition Library Archives for archived information.

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