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Boof

Contractor retention of documents - How long?

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I am curious about the retention periods contractors are required to retain documents. FAR Clause 52.215-2 states that records should be retained for 3 years past the final payment unless FAR 4.705-1 to 705-3 prescribes less. FAR 4.705 only requires 4 years retention for most documents but does not say when that 4 years begins so you assume it is based on the date of the document. This allows contractors to dispose of documents prior to the final payment and two years prior to when they may submit a claim on the cost. Any idea why the FAR allows this? Am I just missing something?

Since the auditors are running years behind in making indirect cost audits, we are running into big issues settling REAs, claims and getting a final close out of the actions because the contractor says the documnets were disposed of after 4 years. We plan to ask for an agency clause increasing the retention time (The FAR clause states "or for longer periods required by statute or by other clauses of this contract" to six years from our accepting thier indirect cost rate proposal.

I hope someone can provide me some background on why the FAR is the way it is and why I might not want to add such a clause.

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See FAR 4.704 Calculation of retention periods. I would also recommend reading FAR 4.703 Policy.

I am curious about the retention periods contractors are required to retain documents. FAR Clause 52.215-2 states that records should be retained for 3 years past the final payment unless FAR 4.705-1 to 705-3 prescribes less. FAR 4.705 only requires 4 years retention for most documents but does not say when that 4 years begins so you assume it is based on the date of the document. This allows contractors to dispose of documents prior to the final payment and two years prior to when they may submit a claim on the cost. Any idea why the FAR allows this? Am I just missing something?

Since the auditors are running years behind in making indirect cost audits, we are running into big issues settling REAs, claims and getting a final close out of the actions because the contractor says the documnets were disposed of after 4 years. We plan to ask for an agency clause increasing the retention time (The FAR clause states "or for longer periods required by statute or by other clauses of this contract" to six years from our accepting thier indirect cost rate proposal.

I hope someone can provide me some background on why the FAR is the way it is and why I might not want to add such a clause.

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Boof, I cannot speak to why the FAR is written the way it is. However, as has been stated in this forum on several occasions, what is in the FAR are statements of government procurement policy and guidance to contracting officers. What imposes requirements on contractors is the terms of their contracts. If a contract contains 52.215-2, the contractor is required to retain records in accordance with that clause, not 4.7. Failure to do so, can result in costs being disallowed in accordance with FAR 31.201-2(d), which is one of DCAA's favorite FAR section.

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Retreadfed,

The clause states The Contractor shall make available at its office at all reasonable times the records, materials, and other evidence described in paragraphs (a), (B ), (c ), (d), and (e) of this clause, for examination, audit, or reproduction, until 3 years after final payment under this contract or for any shorter period specified in Subpart 4.7, Contractor Records Retention, of the Federal Acquisition Regulation (FAR), or for any longer period required by statute or by other clauses of this contract. So it allows them to use FAR 4.7 timeframes. It also would allow an agency clause to extend the time which is what I am considering our procurement executive to consider approving. The two year retention of time cards is horrible.

Mdfam, thanks for pointing out 4.704. I must be blind. My bad.

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I believe Boof is correct in his/her reading of the clause requirements.

I have always preached that the government retains audit rights up to three years after final payment, but that the contractor does not need to retain its records past the periods specified in 4.7. The government can audit, but there may not be a full set of documents available to provide to the auditors.

I am given to understand that my interpretation is fairly aggressive as these things go, but I honestly don't see any other way to interpret the clause if all aspects are to have meaning. I wish somebody would litigate this so we would all have a nice bright line interpretation.

Hope this helps.

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Thanks for the cite, Retreadfed. An interesting case but one that I think could be distinguished. T&M contract with a unique Invoice Submission clause, ASPR Audit clause, timesheet "recaps" instead of timesheets at issue. Perhaps I'm missing the boat but I'm not yet convinced that FAR 4.7 doesn't have a role to play.

H2H

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H2H, FAR 4.7 does have a role to play. That is what the court said in JANA. Essentially, the court agreed with Boof that if 4.7 (ASPR Appendix M) provides for a shorter retention period than the three years after final payment standard in the audit clause, the shorter period applies. However, in JANA, the circuit court held that the appropriate retention period under Appendix M was a four year period instead of two years as the trial court held. Because that 4 year period was longer than the three years after final payment standard contained in the Audit clause, the 3 year period applied.

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Guest Vern Edwards

FYI, see: Karen L. Manos, "Records Retention, Untimely Audits and Cost Allowability," Government Contract Costs, Pricing & Accounting Report, January 2013 (8 GCCPAR ¶ 1).

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Thanks for the reminder, Vern. I'm embarrassed to post that her article had slipped from memory. Just to close the loop on this thread, Ms. Manos' article reached the following conclusion:

"If DCAA conducts an audit after the specified retention periods [found in FAR 4.7] have expired, the contractor’s costs cannot be disallowed based solely on the failure to retain adequate supporting documentation in accordance with FAR 31.201-2(d)."

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Yes that was pointed out to me in post #2 and I acknowledged in Post #4. Just missed it. Thanks.

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