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State withholding $25.6 million from Oracle over health exchange website woes

State withholding $25.6 million from Oracle over health exchange website woes

Cover Oregon was supposed to go live Oct. 1 but still isn't fully functional

Oregon is holding back US$25.6 million in payments from Oracle over work the vendor did on the state's troubled health care exchange website.

Dubbed Cover Oregon, the website was built in connection with U.S. President Barack Obama's health care policy overhaul. It was supposed to go live on Oct. 1 but its launch has been marred by a slew of bugs and it is not yet fully functional.

This week, Cover Oregon said it had reached an agreement with Oracle laying out "an orderly transition of technology development services, and protects current and future Cover Oregon enrollees," according to a statement.

The pact will allow officials to keep enrolling state citizens in health care plans while project moves into its next phase, the statement added.

Cover Oregon is holding back $25.6 million out of some $69.5 million Oracle claims it is owed for project work. "Oracle will not use the disputed amount as a reason to stop providing services during this open enrollment period," according to this week's announcement.

The vendor will fix the site's issues under Cover Oregon's supervision. In addition, the state is reserving the right to sue Oracle as well as challenge payments it has already made.

Oregon officials reached the deal with Oracle after the company reportedly threatened to pull all of its workers off the project and essentially walk away.

The state plans to study its options, which include keeping the functionality that is working properly but signing a contract with a different systems integrator for subsequent phases. It's also possible Cover Oregon will use software developed for other state exchanges or Healthcare.gov, according to this week's announcement.

An Oracle spokeswoman declined comment Wednesday.

While the state has obtained a price reduction, it's not clear what more has been accomplished under the pact, according to analyst Michael Krigsman, CEO of consulting firm Asuret and an expert on the roots of IT project failure.

The state's announcement "does not indicate how the work has changed, to remove the obstacles that caused problems in the past," Krigsman said via email. "Unless something changes in the actual work or project management, then what will cause an improved result this time around?"

Much like the problems that cropped up with the national Healthcare.gov website, as well as a number of other state exchanges, Cover Oregon's difficulties have sparked a political firestorm, with Oregon lawmakers recently calling for a federal probe into the project.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

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