Calif. Cancels Oracle Contract

The state of California ended a controversial deal in which it licensed Oracle database software.

The state of California has ended its controversial enterprise licensing agreement with Oracle Corp. following months of legislative hearings and high-level resignations over a state audit report criticizing the deal.

Officials with the state, Oracle and reseller Northrop Grumman reached an agreement to rescind the six-year, $95 million contract and relieve the state of any further financial obligations, announced California Attorney General Bill Lockyer late on Tuesday.

A state audit had found that the enterprise license agreement would cost the state $41 million rather than save it $110 million as Oracle has contended. Oracle, of Redwood Shores, Calif., had disputed the audit findings.

"Todays agreement serves California taxpayers and successfully meets the states objectives," Lockyer said in a statement.

The state had begun negotiating an end to the contract in May as a series of legislative hearings began to investigate the way the state handled negotiating the software contract. The contract allowed as many as 270,000 state employees to use Oracles 8i database software. The hearings ended in mid-June.

A string of officials resigned as state legislators criticized the deal. They included Elias Cortez, the director of the state Department of Information Technology that had been part of signing the deal, after he was suspended by Gov. Gray Davis; and Arun Baheti, director of eGovernment. The statewide IT department was effectively shut down after an executive order from Davis last month, and the state legislature has voted not to renew its charter, which expired this month.

Oracle has staunchly defended the contract and its ability to cut costs for the state. But on Tuesday it offered a more conciliatory response as it agreed to rescind the deal.

"Oracle Corp. is pleased to have resolved this matter to the satisfaction of the State of California," said Jim Finn, Oracles vice president of Worldwide Corporate Communications, in a statement. "We look forward to working with the State in the future."

Democratic Assemblyman Dean Florez, an outspoken critic of the contract who had headed the hearings as chairman of the Joint Legislative Audit Committee, said he felt vindicated from the news of the contracts rescission. After the hearings, Assembly Speaker Herb Wesson ousted Florez as the committee chairman.

"From the beginning, my agenda was to get our money back. We did," Florez said in a statement. "Any price I paid politically was worth it."

Florez said that the contracts ending proves that audit and public hearings worked by not allowing the contact to be lost in state bureaucracy. He called on Lockyer to now pursue an investigation into whether there was any criminal wrongdoing relating to the contract.

"Yes, we got our money back, but individuals who may have broken the law should be aggressively pursued and punished," Florez said.

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