rattled the black box
in which the European Commission keeps its €10m Oracle contract, its Directorate-General for Informatics (DIGIT) has attempted to answer our questions about it.
How, we asked, did the Commission legally justify striking a €10m, three-year deal with Oracle without opening it up to tender, so anyone to have a pop?
A spokesman for the Commission said today in a written statement that it struck the three-year Framework Agreement as a “direct consequence” of Oracle’s acquisition of BEA Systems.
DIGIT awarded the Oracle contract on 18 December 2009. Oracle completed its acquisition of BEA Systems almost 20 months earlier, on 29 April 2008.
The spokesman said the Commission used BEA WebLogic software on “about 300 information systems”. He implied that the Oracle deal was done in order to upgrade BEA Oracle licences. He said:
“The Commission assessed alternative platforms available on the market and concluded that the cost of migrating the existing base of information systems was more than 7 times higher than the cost of continuing to use the Weblogic product range.”
In other words, the simple conclusion that replacing an embedded system would be too expensive was enough to deter an open competition for an alternative. EC competition rules are designed to prevent this sort of Hobson’s choice, rife as it is in the technology sector.
But the Commission failed to provide a precise justification of the Oracle deal. This would include an assessment of the prior state of the BEA licences, whether they were up for renewal in December 2009 or whether their renegotiation was done as a result of a change of terms imposed by Oracle after its acquisition.
If Oracle had changed its licence terms, it may have been unable to impose the new terms until the told licences expired. Either way, it is not clear from the EC’s answer how an acquisition would create a logical need for licence renewal 10 months later without an open competition. Neither can it be assumed the Commission got a good deal.
Indeed, Computer Weekly did not ask merely how the EC justified the Oracle deal legally. As it happens, the EC did not do even that: it provided a description of its justification but not the documentation by which it actually justified the deal under Article 126 of the European Financial Regulations.
On these pages, we also asked the broader question of the technical and competitive efficacy of the Oracle Framework.
How, we asked, could the Commission justify striking shoe-in deals and shrouding them in secrecy when the market could only evolve in full awareness of those instances where it had failed so significantly that such deals were necessary?
The Commission did not tackle this point. But it did give some context that can only lead to greater dissatisfaction for those who believe that procurement transparency and open standards are the two unexpendable components of a healthy technology market:
“Because Oracle had become the owner of the products formerly sold by BEA Systems, the Commission conducted a negotiated procedure with Oracle. This enabled the Commission to protect its past investments by securing the best possible conditions. This is both in full conformity with the procurement legislation and in the interest of the EU taxpayers.”
Leaving aside the unsettled matter of whether the EC did indeed strike a good deal, the question still remains whether an open competition might have contributed to the generation of alternatives that, if not in 2009, and if not in 2012 when the Oracle contract is up for renewal then simply maybe, might encourage competition.
The EC statement in full:
“The procurement procedure to which the contract notice in question relates is a direct consequence of the acquisition of BEA Systems by Oracle in 2008. Products from the BEA Weblogic range were in use at the Commission for about 300 information systems supporting both administrative processes and EU policies in various areas.
“The Commission assessed alternative platforms available on the market and concluded that the cost of migrating the existing base of information systems was more than 7 times higher than the cost of continuing to use the Weblogic product range.
“This is a clear case in which the provisions of Article 126(1)(b) of the Implementing Rules of the Financial Regulation apply. Because Oracle had become the owner of the products formerly sold by BEA Systems, the Commission conducted a negotiated procedure with Oracle. This enabled the Commission to protect its past investments by securing the best possible conditions. This is both in full conformity with the procurement legislation and in the interest of the EU taxpayers.