The SmartBidNet Blog welcomes Carol Hagen, MBA, the president of Hagen Business Systems Inc. Carol has 25 years of experience in the construction software industry, and as avid followers of her blog, we are grateful for the opportunity to share some of her knowledge with our readers. Carol is a frequent contributor to Constructech Magazine and has also been published in the ASA Contractor’s Compass. Notable speaking engagements include the NAWIC’s 2009 & 2010 National Conventions and CFMA’s 2010 National Conference. Carol offers social media consulting and frequently blogs about construction technology and LinkedIn. She was awarded the first “Outstanding Associate of the Year” by the CFMA Valley of the Sun Chapter in 2001.
Contractors Must Keep Project Documents
Just how long should I keep project files, emails, and correspondence? This is a common question that has a multi-part answer in the construction industry. In order to answer this or create a records retention policy, you must begin with determining your risk tolerance across your departments and continuously re-evaluate your future exposure as you enter into new projects. Here are a few construction centric discussions within an outline of the steps you should take to create your own records retention and e-policy:
Create a Team of Decision Makers that provides a mix of your legal, accounting, human resources (HR), information technology (IT) and operations management. By assembling this cross section of team members you will better understand the responsibilities and concerns as well as the current policies and capabilities within each department.
Document All Your Document Types with Current & Planned Retention Periods, as the type of document often will dictate the retention period required. This is particularly true for HR and accounting but there may be overlap of these documents into the operations side that mandate longer than the individual department’s required retention policy (to meet federal or state requirements). Some documents, like “as-builts” are to be retained for the expected lifetime of the building. If you work with asbestos there is OSHA safety documentation requirements mandating a 30 year retention period. An email about lunch next week should not be construed as a business record and does not have to be kept at all.
Assign a Risk Value to Each Document that is a Business Record. What are the typical contents of these documents? Contracts and contract changes carry more value than an accounts payable invoice. Project correspondence that contains clarifications, structural engineering notes or testing results may just save your tail. The majority of issues arise within 5 years of project completion. Knowing this, the middle ground of project document retention and destruction may be shorter or longer than your state’s statute of repose (3-10 years). There are also “old school” owners that keep every project document (in paper form) in their warehouse and can pull the project files from their first project if you’d like to see them. This is more risk than reward if they’ve been in business for 20+ years.
Discuss the Worst Case Scenario. In taking the worst case scenario approach, you can work backwards into the best practices and find common ground for establishing proper records retention and destruction timelines. Often it is finding a balance from team or department perspectives that is most difficult. Email is the number one target for e-discovery. Accounts payable is second. The longer you retain your records, the greater the number of documents you have and potentially may have to pay for someone to review.
“Something needs to be said when it comes to email. Email is a terrible tool for communication as it does not capture body language, voice inflection or other verbal cues. However, email is excellent for documenting your actionable items and responsibilities after having a conversation and confirming the accuracy of your understanding.”
Explain the Risks in Layman’s Terms. You may hear the Statute of Repose from a lawyer or PST file management from an IT person. Everyone needs to understand the jargon or at least the challenges they create in order to effectively assess the risks and make informed decisions. A legal team will want you to keep all your project correspondence including email for the length of the statute of repose plus one year to be safe from all risk. The opposite is true if you are lax in your documentation or allow project managers to approve changes via email. What I find interesting in these conversations is many people think that having an email in your possession that proves your “guilt” is worse than not having it. What if opposing council already has that email because the recipient kept it? Which position would you rather be in? Knowing about it first, or having it come up later in legal proceedings?
Assess Your Infrastructure to determine if you have the necessary equipment and tools in place to capture, store, manage, retrieve and dispose of documents in a timely manner. The ability to put records “on hold” has also proved challenging in most contracting offices. The IT department will be lobbying for help & resources if you haven’t been archiving email. If you are using Sharepoint, social media or are scanning documents you may want to assess the capabilities of the content management systems you have in place. Having a “paperless” office can be either a dream or a nightmare when an e-discovery issue arises. You may need to prove that documents have not been altered or tampered with. A Write-Once-Read-Many (WORM) capable storage device can help satisfy a court’s scrutiny. Many more challenges exist within it as they are typically “responsible” for accessing and retrieving documents during an e-discovery request.
Know the Rules when it comes to e-discovery. If you work with Public firms or on federal project the Federal Rules of Civil Procedure (FRCP) dictate how quickly you are required to identify and produce records you retain per your e-policy separating archives from backups. Having a policy of retaining email for 1 year, but keeping backup tapes for 3 years may present problems. For instance, your policy should state that tape backups are for the express use of disaster recovery and are not to be used for archiving of files, email, …etc.
By now you realize that it’s time to call the legal department. I also have a few more suggestions that provide additional information on records retention, e-policy and e-discovery. Check out these resources when you have time:
Are Your e-Policies in Place