Transcript NDIA Annual Educational Seminar and Meetings Procurement Division Service Contracting – Record Retention Issues.

NDIA
Annual Educational Seminar and Meetings
Procurement Division
Service Contracting – Record Retention Issues
Record Retention - Access to Records
Requirements of FAR Clauses
• Standard Clause for Negotiated contracts
• Access to Records - Alternative T&C – Commercial Contracts
Applicable Issues
• Relevancy of Records - History
• Case Examples
• Issues and Trends
Outlook
• Disputes, Reliance, Misrepresentation, Conversion
1
52.215-2 Audit and Records
Definition “records” includes:
• Books,
• Documents,
• Accounting Procedures and Practices,
• and Other Data,
• regardless of Type and
• regardless of whether such items are in Written form,
• in the form of Computer data,
• or in any Other form.
2
52.215-2 Audit and Records ; Examination of Costs
Applicable to Contract Types :
• Cost-reimbursement, Incentive, Time-and-Materials, LaborHour, or Price Redeterminable contract, or any combination
Authority:
• The Contracting Officer, or an authorized representative of the
Contracting Officer
Purpose:
• All costs incurred or anticipated to be incurred directly or
indirectly
Where:
• The Contractor’s plants, or parts of them, engaged in performing
the contract.
3
52.215-2 Audit and Records ; Reports
Objective:
• If the Contractor is required to furnish cost, funding, or
performance reports for the purpose of evaluating:
(1) The effectiveness of the Contractor’s policies and procedures to
produce data compatible with the objectives of these reports; and
(2) The data reported.
4
52.215-2 Audit and Records ; Cost or Pricing Data
Objective:
• All the accuracy, completeness, and currency of the cost or
pricing data,
• Including computations and projections, related to:
(1) The proposal for the contract, subcontract, or modification;
(2) The discussions conducted on the proposal (s), including those
related to negotiating;
(3) Pricing of the contract, subcontract, or modification; or
(4) Performance of the contract, subcontract or modification.
5
52.215-2 Audit and Records ; Other
Comptroller General:
• Access to and the right to examine any of the Contractor’s
directly pertinent records involving transactions related to this
contract or a subcontract hereunder.
• Does not require the Contractor or subcontractor to create or
maintain any record that the Contractor or subcontractor does
not maintain in the ordinary course of business
Subcontractors:
• Must flow down to all subcontracts under this contract that
exceed the simplified acquisition threshold
6
52.215-2 Audit and Records ; Periods Affected
• 3 years after final payment under this contract, or
• Shorter period specified in Subpart 4.7, or
• Longer period required by statute or by other clauses of this
contract.
• Terminated contracts, partial or full; 3 years after any resulting
final termination settlement;
• Appeals, Litigation, or Claims related to the contract until such
appeals, litigation, or claims are finally resolved.
7
52.212-4 Contract Terms and Conditions - Commercial Items;
Alternate I (Feb 2007) - Audit and Records
For T&M or Labor-Hour Contracts
• At any time before final payment under this contract,
• Access shall be limited to the listing below, unless otherwise agreed to
by the Contractor and the Contracting Officer:
(i) Employees time on invoice meet qualifications for labor categories
specified in the contract;
(ii) Timecards when required as substantiation for payment, and
Subcontractor hours reimbursed at the hourly rate in the schedule
• Original timecards; Timekeeping Procedures; Distribution of
labor between jobs; and verify employees have worked the
hours shown on the invoices
(iii) For material and subcontract costs that are reimbursed on the
basis of actual cost
• Any invoices or subcontract agreements substantiating
material costs; and documents supporting payment of those
invoices
8
Life Cycle of a Contract : Record Retention Affected Time Periods
T&M / LH Commercial
RECORD RETENTION PERIOD
Solicitation
Final
Payment
Proposal
Submission
• Price Composition
• Labor categories
• Experience
• Scope - Mix
3 Years
Final Payment
Negotiation /
Final Agreement
9
Contract Award
Resolution
•Termination
•Claims
•Disputes
•Appeals
Considerations, Cases, & Trends ….
10
What Do You Know About Your Records ?
Authorship /
Benefactor
Storage
Medium
Ease of Retrieval
& Access
?
Originating
Purpose
Consistency &
Use of Terms
Relevancy
11
Case Examples
US-FED-CLAIMS, 47 CCF ¶78,122, Renda Marine, Inc. v. United States,
United States Court of Federal Claims, (Aug. 29, 2003)
•
A marine dredging contractor was required to produce job cost records in response to a
discovery request, and identify and describe unavailable documents, because a
reasonably prudent person would not have destroyed material bearing on his or her
claim. The job cost records were particularly relevant to that claim.
ASBCA, GOV-CONT ¶89,917, Analytical Assessments Corporation, (June 25,
2001)
•
12
The government was entitled to recoup payments under a cost-plus-fixed-fee contract
because the contractor failed to keep records supporting the invoices. The contractor
submitted invoices for work done by a subcontractor that were provisionally paid.
However, the “partial evidence” was insufficient to permit the government to determine
the amounts or the allowability of costs actually incurred in performing the contract.
Furthermore, the contractor failed to independently audit the invoices it received from the
subcontractor to establish the reasonableness of the level of effort expended.
Case Examples
GSBCA, 91-1 BCA ¶23,513 , National League of Cuban American
Community-Based Centers , (Dec. 28, 1990)
•
Under a contract to provide an adult education program, the government was estopped
from applying the strict terms of the Record Retention clause to demonstrate the
contractor’s violation of its duty to maintain records required for an audit, because the
contracting officer had ordered the contractor to destroy all records that contained any
individually identifiable information about participants in the program. The contracting
officer was fully aware of the contractor’s record-keeping obligations under the contract.
The knowledge that many of the records ordered destroyed may have been necessary
for an audit of the contract was imputed to the contracting officer.
US-CT-APP-FC, 37 CCF ¶76,116, JANA, Inc. v. United States, United States
Court of Appeals for the Federal Circuit, (June 13, 1991)
•
13
The government was entitled to recover overpayments for two contracts in which it
discovered, during a routine audit performed more than two years after final payment,
that there were discrepancies between the number of hours billed and the hours actually
worked according to the contractor’s records, because the contractor did not retain
records to substantiate the invoices.
Case Examples
US-FED-CLAIMS, 45 CCF ¶77,821, Cavalier Clothes, Inc. v. United States,
United States Court of Federal Claims, (Sep. 24, 2001)
•
14
A contractor did not meet the criteria for recovery under the total cost method of pricing
adjustments, because its inability to prove actual losses was directly attributable to its
failure to preserve production records. The contractor could not establish its actual
losses because it abandoned and ultimately discarded the only records that detailed how
many coats were reworked and for what reasons, despite a contract clause mandating
record retention.
Trends, Technology, Other Influences….
• Familiarity is rooted in IRS requirements for Financial Statements
• Emphasis and terminology is further distorted by Sarbanes Oxley
(SOX) requirements
• Access to records is frequently used in parallel with Emergency
Preparedness & Disaster Recovery objectives.
• Tendency to develop “One-Approach-Serves-All ”
• Training is often limited to Facility / Service Center functions
• Requirements are often driven by Off-site Vendor agreements and
Technology capacity
• Training tends to be a back-end process
• Contract Requirement is not addressed in approvals and reviews
unless Cost & Pricing Data is required
15
Outlook….
• Disputes, Bid Protests, Government’s Contracting Officers’ own record
keeping may be brought into question
• Documented Compliance Training
• Collaboration with Technology experts to establish protocols,
retrievals, naming conventions, etc…
• Electronic database reminders, trigger mechanisms, destruction
policies, and monitoring
• Better sophisticated integrated arguments when relying on selected
records and materials
• Known relevancy to contract issue
16
Thank-you
Nancy Harrison
FTI Consulting
March 31, 2008
17