The General Services Administration is terminating a lucrative contract held by Oracle Corp., determining it is "not in the government's best interest" to continue the relationship.
The move comes six months after Oracle paid $200 million to settle the GSA's largest-ever False Claims Act suit. Although the settlement included no admission of wrongdoing, the trial court judge called evidence that Oracle had defrauded the government "extraordinarily powerful."
Oracle’s IT Schedule 70 contract for information technology professional services will be terminated effective May 17, GSA announced yesterday. According to Federal News Radio, Oracle did more than $370 million in sales through the IT schedule in fiscal year 2011.
In procuring supplies for other government agencies, it falls to GSA to determine if a contractor meets the “present responsibility” standard. This includes whether the contractor has shown satisfactory integrity and business ethics.
“The Federal Supply Schedule cancellation clause is standard in all GSA schedule contracts but it is not often used,” said James McCullough, who heads the government contracts practice at Fried, Frank, Harris, Shriver & Jacobson. “However, Oracle’s recent settlement of the civil False Claims Act case may have been a factor in the decision to cancel the Oracle contract since only the GSA can make a determination of present responsibility for Federal Supply Schedule contractors, and GSA has said that it continuously monitors contractor performance and contract compliance throughout the life of the schedule contract.”
The False Claims Act case involved allegations from a whistleblower that Oracle overcharged the government tens of millions of dollars for software, and that the company hired the law firm Reed Smith to produce a "selective and misleading" report -- whether firm lawyers knew it or not -- that made it appear Oracle had done nothing wrong.
Oracle, a worldwide leader in database software, claimed that matters inadvertently went awry, in part, because it didn't know what was in its own internal databases.
According to a statement by Mary Davie, GSA’s assistant commissioner in the FAS Office of Information Technology Solutions, “all blanket purchase agreements awarded against the contract will terminate May 17. Existing task orders may continue through their stated period of performance; however, ordering activities will not be able to exercise options to these task orders or place new orders.” Agencies will still be allowed to buy Oracle software and maintenance programs through resellers.
An Oracle spokeswoman could not be immediately reached for comment.