Adequate Records

Two key Federal Acquisition Regulation clauses inform documentation requirements for cost-type contracts: FAR 31.201-2(d), Determining Allowability, and FAR 52.215-2(b), Audits and Records — Negotiation. FAR 31.201-2(d) assigns contractors the responsibility to maintain records to support their claimed costs and provides that the contractors’ documentation must be “adequate to demonstrate that costs claimed have been incurred, are allocable to the contract, and comply with applicable cost principles.”

If DCAA conducts an audit after the specified retention periods 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). At the very least, contractors may rely on alternative evidence.

Court Cases Involving Adequate Records

BearingPoint, Inc.,

In cases in which there was no issue of the contractor failing to retain records for the specified retention period, the ASBCA has consistently rejected Government attempts to disallow costs for inadequate documentation. For example, in BearingPoint, Inc., the ASBCA stated, "We reject [the U.S. Agency for International Development’s] central argument that the dis-puted labor charges are unallocable for insuf-ficient documentation. The contract clauses do not impose the stringent requirements of either “nice neat little files” that [the CO] sought…, or the contemporaneous records for which AID appears to be arguing. In BearingPoint, the contractor relied on testimonial evidence and corroborating documentation to support labor charges in the absence of time cards that were lost or destroyed.

Locheed-California Co.

In Lockheed-California Co., a case involving a contractor’s claim for interest, the ASBCA rejected the Government’s “Audit and Records clause defense … that Lockheed ‘has failed to comply with an express condition precedent to further payment’ by failing to provide various records that it was required to maintain by the clause.”38 The ASBCA found that “Lockheed has produced documentation ‘sufficient to reflect properly’ the claimed interest costs.”