John Paczkowski

Recent Posts by John Paczkowski

DOJ Sues Oracle for Alleged Overcharging

The U.S. Justice Department has joined a whistle-blower lawsuit against Oracle accusing the company of defrauding the United States government. Filed back in May 2007 under the False Claims Act, the suit alleges Oracle overcharged the federal government by tens of millions of dollars by failing to offer it the same deep discounts the company offered commercial customers.

That’s a real problem, because Oracle was obligated to do just that under the terms of the General Services Administration contract by which it was bound.

“The whole idea of GSA schedule discounts is that the government, in the aggregate, is likely to be one of the largest purchasers of a company’s products, and is entitled to take advantage of the discounts that its large buying power should command,” the complaint claims.

That is tough to do if the discounts given to most favored customers are never disclosed. The GSA is supposed to be a guarantor of best price, an arrangement that allows the government to purchase products and services without having to negotiate a new contract every time. Evidently, in this particular case, it wasn’t.

Result: Taxpayers “overpaid for each Oracle software product by the amount of discounts and reductions from other commercial pricing practices that should have applied to each such purchase.”

Oracle (ORCL) has not yet responded to a request for comment. If it does, I’ll update here.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik