Oregon Health Authority (OHA) awarded Deloitte Consulting, LLC a fixed-price, deliverables-based contract of $18 million that is suppose to ensure Oregonians have seamless online enrollment into health insurance. Hopefully the state learned some lessons from the previous debacle with Oracle (a contractor that had no limits with very little oversight). The Deloitte contract includes accountability and oversight terms. Payments are made only upon state approval of deliverables. Additionally, an amount is held back to ensure the system continues to work as delivered.
In July we heard about outrageous staff bonuses when, following months of errors, omissions and colossal screw ups at Cover Oregon, the Interim CEO Clyde Hamstreet offered retention bonuses to hold onto the organization’s employees. Some 38 employees were aligned to receive bonuses worth one to three months’ pay. Hamstreet called the $650,000 a ‘paltry sum.’
In June Governor Kitzhaber asked Oregon Attorney General Ellen Rosenblum to initiate legal action to recover payments and other damages from Oracle, the state’s chief technology vendor for Cover Oregon. Citing Oracle’s failure to deliver a fully functional website, the Governor also made a request to Daniel Levinson, the inspector general of the U.S. Department of Health and Human Services, to evaluate the work performed by Oracle and consider the full range of legal options.
That announcement came after the Cover Oregon board voted to drop its unfinished IT project and shift to the federal exchange, despite $248 million spent. The move will cost approximately another $40 million, most of it picked up by the federal government.
The lawsuit required retaining a Portland law firm experienced in business litigation, Markowitz, Herbold, Glade & Mehlhaf PC, for a $2 million contract. It’s especially challenging, however, to fight a colossal company like Oracle who lists an annual net income of $3.6 billion.
The lawsuit, filed in Marion County Circuit Court in Salem, seeks nearly $500 million in damages and alleges that Oracle officials made false statements and submitted false claims. Oracle has also filed its own lawsuit alleging breach of contract and seeking payment of more than $23 million in disputed bills. The software company blames Oregon for the website’s failure, saying the state had incompetent and indecisive staff (many who later received bonuses).
The attorneys for the Oregon case have already spent at least half of the $2 million allocated for the lawsuit. The cost associated with the case are not surprising: David Markowitz charges $650 an hour and associates can charge anywhere from $295 to $525. You have to ask how can one single attorney be worth $650 an hour — although he is considered by his peers to be among the finest trial lawyers in the Northwest.
Just so you don’t feel so bad New Jersey taxpayers will be footing the legal bills for at least five current or former state officials involved in the Chris Christie George Washington Bridge scandal. Gibson Dunn & Crutcher, the law firm retained by the governor’s office, bills at $650 an hour.
Meanwhile the FBI and the federal Government Accountability Office are also investigating Oregon’s exchange problems.
We’ll be watching this case very closely and trust these attorneys can recoup some of the costs from the ill-fated Cover Oregon.
