The U.S. Department of Justice's announcement this week that it chose American Management Systems (AMS) as its supplier for a pricey software system is likely to complicate its antitrust case against Oracle, according to industry experts.

The Justice Department's lawsuit to block Oracle from acquiring rival PeopleSoft hinges on its argument that the high-end market for human resources and financial management software has only three vendors able to meet the needs of the largest organizations: PeopleSoft, Oracle and SAP. However, the department said Tuesday it will spend up to $24 million with AMS to replace a patchwork of accounting systems with a modern, departmentwide financial system based on AMS' Momentum software.

"I think this is a classic case of the people in procurement proving their leadership completely off the wall," said Josh Greenbaum, who runs a Berkeley, Calif., enterprise applications consultancy and research firm. "There's absolutely no doubt that there's tremendous competition in the marketplace."

A Justice Department spokeswoman declined to comment on the antitrust-case implications of the department's software selection.

The Justice Department's procurement process for software to run its under-development Unified Financial Management System predates its case against Oracle. The department decided in 2001 to build a new financial system, and soon after solicited proposals from the list of vendors with software certified by a government coordination group called the Joint Financial Management Improvement Program (JFMIP). Five vendors are currently certified by JFMIP: Oracle, PeopleSoft, SAP, AMS and Savantage Solutions.

The financial-system overhaul project is a lengthy and complex one, and the Justice Department expects full implementation to take several years. It was initially scheduled to announce its vendor selection in May 2003 -- one month before Oracle began its PeopleSoft takeover campaign.

After reviewing the proposed deal, the Justice Department filed suit in February to block a PeopleSoft/Oracle combination, which it argues would seriously harm innovation and pricing competition in the enterprise resource planning (ERP) market.

"It's entirely possible that Justice can still make its case, but I would submit that this recent purchase of the AMS ERP software could very well be a complication for the government. It's something the DOJ is obviously going to have to explain," said Donald Barnes, a Washington, D.C., antitrust specialist at Porter Wright Morris & Arthur.

The IDG News Service is a Network World affiliate.