7 Decisions that Doomed Cover Oregon and Why Oracle will Prevail in Litigation

From an outsider’s perspective, it is all over but the shouting.  The foundation the State of Oregon is attempting to build in its suit against Oracle is crumbling.  Oracle is going to deliver a beating to Oregon that makes the Ducks loss to the Buckeyes appear like a close game.  Oregon’s new Governor, Kate Brown, has signed the bill dissolving Cover Oregon, a private company launched by the state to manage Oregon’s version of the federally mandated healthcare exchange.  The recent revelations of former Oregon Governor’s campaign staff to take the lead in the decision making regarding the future of Cover Oregon virtually seals the deal for Oracle to win its own suit against the state.

Background

Cover Oregon is the State of Oregon’s version of the Federal Government’s Healthcare.gov.  In 2010, Oregon chose to build its own healthcare exchange program rather than adopt the Federal exchange.  The state leveraged federally granted money of over $300 million dollars to build Cover Oregon’s website.  This was paired with another program to replace the IT systems supporting the state’s Health and Human Services departments.

Oracle software was selected to support the implementation of both of Oregon’s programs.  Oracle also provided the overwhelming majority of the consulting and programming services required to configure the exchange and build the integrations to the federal systems, local health care providers, insurance brokers, and the remaining state systems.

Fast forward to October of 2013.  Cover Oregon, the State’s artfully crafted private company, “went live” with the exchange on schedule.  Well, “went live” is a strong term, I would more appropriately say attempted to go-live.   The exchange was a complete and utter failure.  Not a single healthcare insurance application was taken through the site before it was shut down in February of 2014.  Since that time, the mud has been hurled between Oregon and Oracle, lawsuits have been filed, and jobs have been lost.

Most prominently, Oracle has sued Cover Oregon for $24 million dollars in payments it believed it is owed for services rendered.  Oregon has sued Oracle on the basis or racketeering charges that could potentially amount to over $5 billion dollars in damages.  Recent revelations regarding the apparent delegation of Cover Oregon’s fate to the Governor’s campaign staff has all but sealed the deal for Oracle to win its suit against the state and ultimately contributed to the Governor’s resignation in February.

The irony is that Oregon has had to work through the courts to keep Oracle working on the portions of the systems that do work.   Oracle’s contract expired at the end of February 2015.  The company had expressed no interest keeping the internals of Oregon’s healthcare system operational.  Oregon has petitioned through the courts to force Oracle to stay on the job until the exchange can be transitioned.  These petitions were granted at the end of February.

From our research, the single most important critical success factor of any transformation program is the ability to make quality decisions.  Now, nobody is in the business of making bad decisions and it is easy to Monday morning quarterback, so let’s explore the eight most pivotal decisions that set the course for this epic failure.

1. Expand the scope of the exchange project to include replacing all of the Department of Human Services systems

Clearly driven by Oregon’s desire to keep taxpayer costs low, it is fundamentally a bad decision to expand scope when you are dealing with a project that has a deadline mandated by federal law.  While other states building their own exchanges were shedding scope to keep the project manageable, Oregon took its first step toward failure by expanding.

2. Creation of the Oregon Health Authority

The Oregon legislature split the Department of Human Services (DHS) into two independently operating bodies by creating Oregon Health Authority (OHA).  Responsibility for the health exchange was assigned to OHA while the support for the remaining systems was left with DHS.  The split was intended to create focus for the OHA project team to deliver the exchange.

However, when combined with Decision 1, this decision created a complex program governance structure which had a destabilizing effect on the team.  Later, a third governing body was created in the form of Cover Oregon.  Cover Oregon was the private company that was formed to operate the exchange after it was put in place.

3. Wall-to-wall Oracle Software

The decision to select Oracle’s recommended application software suite to build the exchange and the replacement of the systems for DHS appears to be a last man standing scenario.  All other vendors dropped out of the bidding when faced with the broad scope of requirements and the tight deadlines for delivery.  The state’s software project team also selected almost every other Oracle product in support of the exchange databases and operating infrastructure.

The idea of selecting all software from one vendor conceptually supports reducing risk.  However, in this case, the vast expanse of software implemented increased the risk given that the Oregon IT teams had no prior experience with the Oracle product lines.  Further, it was later revealed that the combination of Oracle products selected had never been put in place in a production environment.

4. Not to engage a system integrator other than Oracle

In an attempt to save money, the appointed CIO determined that the state did not require the services of a systems integrator independent from Oracle.  Instead, they decided to train their own team on Oracle products to drive a self-sufficient organization.  The logic behind this decision is clear, if you train your own people, you can create independence from your service provider and ultimately create the potential to deliver greater value to the organization.

However, the State of Oregon did not have the staff available to train and were losing as many people as they hired.  A staff of Oracle programmers coupled with a program lead that lacks experience is typically a recipe for disaster.

5. The sole use of time and materials contracts

There were over 40 separate time and material purchase orders cut for Oracle services.  The background investigations have shown that these contracts lacked specific deliverables and did not hold Oracle accountable to specific delivery targets or objectives.  I suspect that the lack of a clear project scope, the tight time table as well as the uncertainty regarding the overall capabilities of the Oregon team was logic behind this decision.  Clearly defined contracts with the proper incentives put project teams in the best position to succeed.

6. Choosing not to heed the advice of independent risk assessors

The program clearly had sufficient structural oversight.  In fact, there were at least six different departments, firms, or governing bodies that conducted reviews of the program.  Nearly all of them reported the exchange program was in trouble and major and dramatic actions were required to put it back on track.  Why were these reports not heeded?  Evidence suggests in many cases the reports were scrubbed and toned down or even suppressed before reaching the highest levels of governance.

In one documented situation, the independent review firm’s payment was withheld due primarily to the findings of the risk associated with the report.  Another possibility is that everybody understood the program was high risk; the reports were simply an acknowledgment of this.  My take is that the decision not to heed the advice of the independent risk advisors ties back to the complexity of the governance structure.  The program lacked a single point of accountability from which to make specific decisions regarding the risk mitigation actions to take.

7. Choosing not to put a contingency plan in place

Given all of the problems that were in plain sight, it is unclear why Cover Oregon had no contingency plan in place in the event of failure.  Documentation shows that even as short as 3 weeks before the expected go-live, it was apparent that the team was not ready.  Following the failed go-live, Cover Oregon was faced with hiring data entry and customer services teams to take hard-copy applications and load them into the state’s systems.  One can only speculate it was pure hubris and summit fever that pushed the team to go-live without a net.

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