Oracle agreed to pay a $98.5M fine, resulting from overcharging on government contracts by Oracle’s PeopleSoft subsidiary. (The overcharging took place before Oracle acquired PeopleSoft .)
The government is always supposed to get the “best price”, but in some cases, other corporate customers got bigger discounts. By law, the government is entitled to those discounts.
3 quick points about this story:
- Anyone doing business with the government or who has “Most Favored Nation” contracts with any of their customers needs an automated way to detect discounts or pricing policies that might violate existing agreements. In the private world, people talk, and eventually word will get out. In dealing with the government, they can audit, and it’s the law.
- Big discounts for big customers are almost always more expensive than deal analysis indicates, because discounts can cascade into other accounts, especially when the government is involved. Deals that might cause cascading discounts, whether contractual or just due to whispers in the grapevine, require deal portfolio analysis.
- As the alert reader who submitted the WSJ article noted, federal law provides an economic incentive for whistleblowers in these cases. A former PeopleSoft employee tipped off the government. He’ll receive $17.7M. With a payout like this, some employees might prefer to blow the whistle, rather than bring the overcharging to the attention of the company so corrective action can be taken. Which brings us back to point number 1.