Auditors joust over Oracle contract

Auditors for the state of California and the software maker give conflicting testimony over the value of a controversial contract being investigated by a state legislative committee.

Alorie Gilbert Staff Writer, CNET News.com
Alorie Gilbert
writes about software, spy chips and the high-tech workplace.
Alorie Gilbert
3 min read
Auditors for the state of California and Oracle gave conflicting testimony Wednesday over the savings associated with a controversial $95 million no-bid contract being investigated by a state legislative committee.

Since the investigation began in April, state Auditor Elaine Howle has maintained that the contract would cost taxpayers up to $41 million more than it should, while Oracle has said it would save the state more than $100 million during the six- to 10-year contract.

As expected, Howle reiterated her calculations before the committee on Wednesday, while another witness representing Oracle's position, former California state auditor Kurt Sjoberg, found that the state would save money.

In her testimony, Howle walked the committee through various ways to calculate the value of the contract and said that even if they accepted the company's numbers and methods, Oracle and its business partners involved in the deal had vastly overstated the amount the state would save.

Howle's original audit, released in April, has been at the crux of the debate over the six-year contract. The audit also criticized the speed with which the deal was approved by the governor's office and other state agencies. The audit noted that state officials waived protection in the event Oracle lowered its prices, the purchase price didn't include software upgrades and the state purchased far more Oracle licenses than it had employees to use them.

The committee has already heard more than 70 hours of testimony from numerous state employees participating in the deal. Since the contract scandal broke, three state officials have resigned or been suspended and campaign donations from Oracle to the governor and other state officials have been returned.

Critics of the contract have noted that Oracle has long been known for sales tactics considered aggressive even in the high-stakes, high-pressure world of corporate software sales. The state auditor criticized the state's negotiators who agreed to the six-year contract--unusually long in an industry with rapidly changing technology.

Previous testimony has shown that some state employees raised several of these issues.

On Wednesday, Oracle reiterated their position that the contract could save the state money. An auditor hired by Oracle claimed the contract could save the state as much as $163 million. Another auditor, hired by Logicon released a report Tuesday saying that the state stands to save $50 million.

"There is a way to look at this that shows a savings for the state," said Oracle spokeswoman Jennifer Glass.

Committee chairman and Assemblyman Dean Florez later dismissed the idea that the Oracle numbers were more sound than the state auditor's.

"After sitting though nine hours of testimony, my conclusion is we stand by state auditor's report," Florez said. "You get the numbers you pay for, and Oracle got those numbers."

Oracle said the company has been the victim of election-year politics.

"We've been a political pawn in the middle of this thing, and we're not going to let our business practices and our company be impugned," said Oracle spokesman Jim Finn.

Next week the committee will hear testimony from Kevin Fitzgerald, Oracle's senior vice president for government, education and health, and five salesmen involved in the deal.

The committee will not hear testimony, as it had hoped, from several other government agencies in other states and cities that had contracts with Oracle, Florez said. The committee had requested testimony from officials for the state of Ohio, the city of Toronto and other government agencies, but those requests were denied, Florez said.

"We have no interest in testifying before the committee," said Ben Piscitelli, a spokesman for the Ohio Department of Administrative Services. "We continue to have a normal business relationship with Oracle. This is really a California vs. Oracle issue, and we're going leaving it at that."