Capping a very public, politically embarrassing and acrimonious affair, the state of California and Oracle have officially agreed to cancel a controversial US$100 million-plus exclusive database contract.

The contract, signed in May 2001, had been lambasted by critics as a sweetheart deal that would eventually cost the state millions more than if it had been bid on normally.

During the past several months, the contract, known as an enterprise license agreement (ELA), led to the closing of the state's Department of Information Technology and the firing or resignation of several state officials. It also ignited a storm of political controversy for California Gov. Gray Davis.

After a damaging report in April about the deal from the state auditor, the state began negotiations with Oracle and systems integrator Northrop Grumman Corp. to cancel the contract.

Late Tuesday, state Attorney General Bill Lockyer and other officials announced a rescission of the ELA, which could have cost as much as $126 million. According to a statement, the new agreement stipulates that "the state is relieved of any further financial obligations including all associated interest and fees. ... Today's agreement serves California taxpayers and successfully meets the state's objectives by rescinding a $95 million contract that had become controversial.

"Oracle and Northrop Grumman were under no obligation to help California by rescinding this contract, and we appreciate their cooperation and willingness to rescind the ELA," Lockyer said.

Clothilde Hewlett, interim director of the Department of General Services, one of the agencies involved in the ELA, also said, "Their efforts to return the state to the conditions that existed prior to the ELA made it possible to avoid any additional financial burden to the state. We will adopt the best practices in information technology to serve the people of the State of California."

Oracle released a statement by Jim Finn, vice president of communications, in which he said: "Oracle Corporation is pleased to have resolved this matter to the satisfaction of the State of California. We look forward to working with the State in the future."

Oracle has maintained that the ELA would in fact have enabled the state to save money on database purchases and created a Web page to voice its side of the controversy.