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TO THE SECRETARY OF THE DEFENSE: REFERENCE IS MADE TO LETTER DATED FEBRUARY 16. SEVERAL JOINT CONFERENCES HAVE BEEN HELD BETWEEN REPRESENTATIVES OF OUR RESPECTIVE STAFFS. THE VARIOUS ASPECTS OF THE MATTER INCLUDING A NUMBER OF SUGGESTIONS IN ADDITION TO THOSE CONTAINED IN YOUR LETTERS WERE CONSIDERED BY THE CONFEREES. DURING THESE CONFERENCES IT WAS DISCLOSED THAT THE TERM "BULK" ADMITTEDLY DOES NOT AFFORD AN APPROPRIATE IDENTIFICATION OR CLASSIFICATION OF THE PARTICULAR RECORDS FOR CONSIDERATION AND THAT THE INFORMATION AT HAND IS NOT SUFFICIENT TO PERMIT AN INTELLIGENT EVALUATION OF THE TYPES OF RECORDS MAKING UP THE BULK IN QUESTION. WAS RECOGNIZED THAT ESSENTIAL DIFFERENCES IN METHODS.

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B-100489, OCT. 11, 1962

TO THE SECRETARY OF THE DEFENSE:

REFERENCE IS MADE TO LETTER DATED FEBRUARY 16, 1962, FROM MR. GLENN V. GIBSON, ACTING ASSISTANT SECRETARY OF DEFENSE (INSTALLATIONS AND LOGISTICS) WITH RESPECT TO THE FEASIBILITY OF MODIFYING THE EXISTING RECORDS RETENTION REQUIREMENTS APPLICABLE TO NEGOTIATED CONTRACTS OF THE MILITARY DEPARTMENTS FOR THE PRIMARY PURPOSE OF EFFECTING REDUCTION IN THE MOUNTING ADMINISTRATIVE AND STORAGE COSTS ATTRIBUTABLE THERETO. THIS LETTER SUPPLEMENTS YOUR LETTER OF JULY 20, 1961, PROPOSING THE ADOPTION OF A NEW RECORDS RETENTION CONCEPT TO WHICH WE RESPONDED BY OUR LETTER DATED NOVEMBER 27, 1961.

SEVERAL JOINT CONFERENCES HAVE BEEN HELD BETWEEN REPRESENTATIVES OF OUR RESPECTIVE STAFFS, THE BUREAU OF THE BUDGET AND GENERAL SERVICES ADMINISTRATION. THE VARIOUS ASPECTS OF THE MATTER INCLUDING A NUMBER OF SUGGESTIONS IN ADDITION TO THOSE CONTAINED IN YOUR LETTERS WERE CONSIDERED BY THE CONFEREES. DURING THESE CONFERENCES IT WAS DISCLOSED THAT THE TERM "BULK" ADMITTEDLY DOES NOT AFFORD AN APPROPRIATE IDENTIFICATION OR CLASSIFICATION OF THE PARTICULAR RECORDS FOR CONSIDERATION AND THAT THE INFORMATION AT HAND IS NOT SUFFICIENT TO PERMIT AN INTELLIGENT EVALUATION OF THE TYPES OF RECORDS MAKING UP THE BULK IN QUESTION, THE RETENTION AND STORAGE OF WHICH MAY NOT BE REQUIRED UNDER THE CONTRACT PROVISIONS. WAS RECOGNIZED THAT ESSENTIAL DIFFERENCES IN METHODS, PERIODS AND THE CHARACTER OF VARYING CONTRACT OPERATIONS MIGHT WARRANT MODIFICATION OF THE RECORD RETENTION REQUIREMENTS GENERALLY PRESCRIBED BY THE EXISTING STATUTES. SOME "SOURCE" RECORDS APPARENTLY CONSTITUTING A NUMBER OF THE ITEMS DESCRIBED AS "BULKY" HAVE BEEN FOUND TO BE NEEDED AND USEFUL IN FURTHERING GOVERNMENTAL PURPOSES, FEDERAL AS WELL AS STATE. HOWEVER, COSTS OF STORAGE FOR PERIODS EXTENDING BEYOND THOSE STIPULATED BY THE CONTRACTS AND COSTS INCURRED FOR THE PRIMARY CONVENIENCE OF THE CONTRACTOR REASONABLY MAY NOT BE ATTRIBUTED TO PRESCRIBED RETENTION REQUIREMENTS AND MANIFESTLY SHOULD NOT BE BORNE BY THE GOVERNMENT. IN OTHER WORDS, THE DESIRABILITY OF FURTHER STUDY WITH THE VIEW OF OBTAINING MORE SPECIFIC INFORMATION WITH RESPECT TO ALL FACETS OF THE MATTER IS CLEARLY INDICATED.

A LIMITED STUDY UNDERTAKEN AT OUR REQUEST BY A LARGE MANUFACTURING FIRM HOLDING A SUBSTANTIAL NUMBER OF GOVERNMENT CONTRACTS HAS DISCLOSED THAT AS A GENERAL POLICY AND PRACTICE THE CONTRACTOR RETAINS ITS ACCOUNTING RECORDS FOR AN AVERAGE OF 20 YEARS FROM THE DATE GENERATED. SUCH PERIOD SEEMS ABNORMALLY EXTENDED IN VIEW OF THE CONTRACT PROVISION USUALLY STIPULATED PURSUANT TO 10 U.S.C. 2313 WHICH REQUIRES RETENTION FOR "THREE YEARS AFTER FINAL PAYMENT" UNDER THE CONTRACT. SIGNIFICANTLY, THE CONTRACTOR DID NOT ATTRIBUTE THIS TO THE GOVERNMENT CONTRACT RETENTION REQUIREMENTS BUT RATHER TO THE VARIOUS TYPES OF SERVICES AND CONTRACTS--- GOVERNMENTAL AND COMMERCIAL--- PERFORMED DURING THE OPERATIONAL PERIOD; THE COMMINGLING OF ITEMS AND ACCOUNTS UNDER ITS ACCOUNTING SYSTEM PERTAINING TO THE TRANSACTIONS AND PERFORMANCE OF THE CONTRACTS, AND THE NECESSITY OF RETAINING SUCH RECORDS FOR THE STATED PERIOD IN ORDER TO MEET OTHER FEDERAL AND STATE REQUIREMENTS. THE CONTRACTOR HAS ASSERTED THAT THE ADMINISTRATIVE EXPENSE OF SCREENING ITS RECORDS ON THE BASIS OF VARYING NEEDS AND REQUIREMENTS WOULD FAR EXCEED THE STORAGE COSTS.

WE WERE INFORMALLY ADVISED RECENTLY THAT THE RECORDS RETENTION PROBLEM HAD BEEN REFERRED TO THE BUREAU OF THE BUDGET UNDER WHOSE SPONSORSHIP IT HAD BEEN INITIATED ON BEHALF OF INDUSTRY AS INDICATED IN A LETTER DATED JULY 26, 1962, TO THE DIRECTOR OF THE BUREAU OF THE BUDGET FROM THE CHAIRMAN, COMMITTEE ON RECORDS RETENTION REQUIREMENTS OF DEFENSE AGENCIES, ADVISORY COUNCIL ON FEDERAL REPORTS. REPRESENTATIVES OF THE BUREAU OF THE BUDGET AND OF OUR OFFICE HAVE MET AND THE AREAS WHICH IT IS BELIEVED SHOULD BE STUDIED HAVE BEEN NARROWED AND OUTLINED IN AN EFFORT TO FACILITATE A SATISFACTORY RESOLUTION OF THE PROBLEMS PRESENTED. WE CONCUR WITH THE VIEW THAT ,RETAINING UNNEEDED AND USELESS RECORDS" IS NOT REQUIRED AND SHOULD BE ELIMINATED PROMPTLY.

CONSIDERATION MIGHT BE GIVEN TO THE ADVISABILITY OF CLARIFYING WHAT IS INTENDED BY THE CONTRACT CLAUSE "AFTER FINAL PAYMENT" WHICH MARKS THE BEGINNING OF THE CONTRACT PERIOD FOR THE RETENTION OF RECORDS. UNDER THE CONTRACTS OF THE MILITARY DEPARTMENTS "FINAL PAYMENT" USUALLY IS NOT DEFINED AND THE DATE OF FINAL PAYMENT MAY NOT BE READILY DETERMINED FROM THE CONTRACT TERMS. FINAL PAYMENT THEREUNDER APPARENTLY IS CONSTRUED ADMINISTRATIVELY AS HAVING BEEN ACCOMPLISHED ONLY AFTER FINAL SETTLEMENT OF ALL MATTERS REMAINING FOR CONSIDERATION ON THE DATE OF SUBSTANTIAL COMPLETION, THAT IS, ADJUSTMENTS OF COMPARATIVELY MINOR ITEMS OF A ROUTINE NATURE RELATING, FOR EXAMPLE, TO INSURANCE, WARRANTIES, SALES TAXES, PATENT ROYALTIES, CLAIMS ON APPEAL AND SIMILAR ITEMS, AND THE THREE-YEAR PERIOD STIPULATED FOR THE RETENTION OF RECORDS IS INTERPRETED AS BEGINNING ON THE ULTIMATE DATE THE LAST PAYMENT IS MADE. THIS WOULD SEEM TO EXTEND THE GENERAL CONTRACT RECORDS RETENTION REQUIREMENTS UNNECESSARILY AS ALL THE RECORDS PERTINENT TO THE CONTRACT ARE NOT NEEDED FOR THESE MINOR ADJUSTMENTS. IT IS OUR VIEW THAT THE PERIOD FOR RETAINING CONTRACT RECORDS GENERALLY NEEDED AND REASONABLY REQUIRED MIGHT BE MADE MORE CERTAIN AND IN MANY CASES CONSIDERABLY SHORTENED BY DEFINITIZING THE CRITICAL DATE OF "FINAL PAYMENT" TO MEAN THE DATE ON WHICH THE CONTRACT IS SUBSTANTIALLY COMPLETED BY THE PARTIES, THAT IS, THE DATE ON WHICH THE CONTRACTOR'S PERFORMANCE HAS BEEN ACCEPTED AND THE AGREED PAYMENT HAS BEEN MADE WITH THE EXCEPTION OF THOSE ITEMS USUALLY RESERVED FOR FUTURE DETERMINATION AND SETTLEMENT. RETENTION OF RECORDS PERTAINING PARTICULARLY TO SUCH RESERVED ITEMS OF NECESSITY WOULD BE REQUIRED UNTIL FINALLY DETERMINED.

WE UNDERSTAND THAT A CONTINUING EFFORT TO ELIMINATE STORAGE COSTS OF RETAINING RECORDS WHICH ARE USELESS AND RECORDS FOR WHICH A GENUINE NEED DOES NOT EXIST WILL BE MADE BY ALL PARTIES CONCERNED. YOU HAVE MY ASSURANCE OF OUR ENERGETIC COOPERATION IN THIS EFFORT.

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