How Long Should Federal Contractors Keep Contract Records? A Practical Overview by Contract Type

Federal contractors often ask a deceptively simple question: how many years must records be kept after contract closeout? The answer is grounded in FAR Subpart 4.7, which sets retention periods not by contract label—firm-fixed-price, cost-plus-fixed-fee, time-and-materials, or construction—but by the type of record and the timing of the underlying transactions. The familiar “three years after final payment” rule is only the starting point; the real analysis depends on how specific records are categorized and which clauses apply.

FAR 4.703 establishes the core policy: contractors must retain records relating to Government contracts for three years after final payment, unless a longer period is prescribed elsewhere in the FAR or in the contract itself. FAR 4.705 then provides detailed tables of retention periods for financial and cost accounting records, pay administration records, and acquisition and supply records. Some of these must be kept for three years; others, such as certain accounts payable and supply records, extend to four years or more. The retention clock typically runs from the end of the contractor’s fiscal year in which the relevant entry or final entry is made, rather than from a simple notion of “contract closeout.”

For firm-fixed-price contracts with civilian agencies, document retention is often the most straightforward in practice. The Government’s focus is on verifying pricing compliance, billing accuracy, and performance. If no special clauses apply and no certified cost or pricing data are involved, many contractors reasonably align contract-specific files with the three-year minimum, while maintaining system-level accounting and procurement records according to the applicable FAR 4.705 periods.

The picture changes markedly for cost-reimbursement contracts such as cost-plus-fixed-fee awards. Here, indirect cost rates, allocation methodologies, and allowability become central. FAR 4.703 links retention to the timing of final indirect cost rate proposals and extends the regulatory periods when those proposals are submitted late. Because rate negotiations and audits may occur years after costs are incurred, contractors commonly hold cost-type records well beyond the bare minimum, deferring destruction until indirect rates are closed, final payment is made, and any disputes are clearly time-barred.

Time-and-materials and labor-hour contracts occupy an intermediate position. They drive intense scrutiny of pay administration records such as timesheets and labor distribution, as well as acquisition and supply records supporting materials and other direct costs. Although the same FAR tables apply, contractors frequently adopt a conservative four-year retention baseline for these supporting records, particularly where statutes like the Service Contract Act are implicated.

Construction contracts add another layer. In addition to the FAR, contractors must consider Davis–Bacon Act and related labor requirements, which often lead to extended retention of payroll, fringe benefit, and subcontract payment records. Rather than attempt to track multiple overlapping timelines, many construction contractors harmonize upward, keeping all key construction records at least as long as the most demanding applicable requirement.

Across all contract types, electronic storage does not change the underlying obligations. FAR permits imaging and electronic systems, but only if they reliably preserve accurate images and indexes. When records from multiple contract types are interfiled in the same system, the longest applicable retention period effectively governs the entire record series.

In short, there is no single retention period dictated solely by whether a contract is FFP, CPFF, T&M, or construction. A defensible policy begins with the FAR 4.703 three-year baseline, incorporates the specific periods in FAR 4.705, layers on contract-specific and statutory requirements, and then applies these rules consistently across systems. Only then can federal contractors answer the question “how long must we keep this?” with confidence rather than guesswork.

Disclaimer: This blog post is for informational and educational purposes only and does not constitute legal advice. Contractors should review the FAR, any agency supplements, and the specific terms of their contracts, and should consult qualified legal counsel regarding their particular circumstances.