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This section discusses routine matters that occur on a regular basis in the administration of Government contracts.They concern bread and butter items that will recur over and over, when a contract is being performed smoothly and without problems.

Records Management

All Government contractors should maintain adequate record keeping systems. This is especially true where the contract contains one of the audit clauses that grant the Government the right to examine contractor books. It is possible to avoid audits by bidding only on fixed-price contracts pursuant to sealed-bid procurements, where no cost or pricing data is required or submitted pursuant to the Truth In Negotiations Act. Most Government contractors, however, are subject at one time or another to an audit, and a solid records management program is therefore needed. “Records” include data of any kind, which could be on paper, computer, audio or video cassette, etc.

A good records management program includes three key elements: written guidance outlining policy and procedures; retention of records for the prescribed period; and destruction of records at the end of the prescribed period unless the records are the subject of an audit, investigation (subpoena or other legitimate request), or are otherwise needed in the course of business.

• The FAR prescribes the required period for retention of records as follows:
• Financial and cost accounting records: four years, except labor cost distribution cards (two years) and petty cash records (two years).
• Pay administration records: four years for payroll sheets, registers, and tax withholding statements; two years for clock cards and paid checks, receipts for wages paid in cash, or other payments for services rendered by employees.
• Acquisition and supply records: four years for everything except requisitions (two years).

Contractors should have written policies supporting the proper retention period and a systematic method of certifying destroyed records at the end of the period, including the purging of computer drives. Records destruction is just as important as records retention not only because it eliminates the cost and burden of storage, but also because it permits the contractor to respond to any audit or investigation request after the retention period with a certificate of destruction, rather than the records.