Document Retention Periods for Federal Contractors: How Long to Keep Records by Contract Type

Federal contractors often frame document retention questions around particular contract types: a firm-fixed-price construction contract, a cost-plus-fixed-fee R&D award, a time-and-materials task order, and so on. The Federal Acquisition Regulation, however, does not organize retention obligations that way. Instead, FAR Subpart 4.7 sets retention periods by record category (financial and cost accounting records, pay administration records, and acquisition and supply records), and then applies those categories across all contracts that include the standard audit and records clauses.(Acquisition.GOV)

Understanding how these category-based rules play out for different contract types is critical for designing a practical records retention policy. The core principle is relatively simple: as a default, contractors must retain and make available all records relating to Government contracts for three years after final payment, unless a longer period is specified in FAR 4.705 or in an applicable contract clause.(Acquisition.GOV) The complexity lies in how that three-year rule interacts with cost-type contracts, indirect cost rates, construction labor requirements, and certain agency supplements.

FAR 4.703 establishes the general policy. For contracts subject to the standard audit clauses, contractors must retain records for three years after final payment, unless specific record categories in FAR 4.705 prescribe different periods. In addition, FAR 4.703 requires longer retention when the contract itself specifies a longer period, when the contractor voluntarily keeps records longer for its own purposes, or when final indirect cost rate proposals are submitted late, in which case the regulatory retention periods automatically extend one day for each day the proposal is late.(Acquisition.GOV) These nuances immediately matter more for cost-reimbursement and time-and-materials vehicles than for straightforward firm-fixed-price work.

FAR 4.705 then sets specific retention periods for three major categories of records: financial and cost accounting records, pay administration records, and acquisition and supply records.(Acquisition.GOV) Within financial and cost accounting, some records may be kept for as little as two years, while others, such as accounts payable records supporting disbursements to vendors, are expressly subject to a four-year retention period.(Acquisition.GOV) Likewise, certain acquisition and supply records must be retained for at least four years rather than three.(fedmarket.com) Because the regulations categorize records by function rather than by internal file name, contractors must map their filing systems to these regulatory descriptions, rather than assuming that a “contract closeout file” can be treated as a single, uniform record series.

Another subtle but important feature of the FAR regime is how the retention clock is calculated. Under FAR 4.704, the retention periods in 4.705 generally run from the end of the contractor’s fiscal year in which a cost entry is made, or, if a record contains a series of entries, from the fiscal year in which the final entry is made.(GovInfo) The familiar “three years after final payment” formulation in 4.703 co-exists with this fiscal-year-based calculation for specific record categories. For a given contract type, the practical effect is that certain accounting records may need to be kept slightly longer than a simplistic “three years from closeout” rule of thumb would suggest.

For firm-fixed-price (FFP) contracts with civilian agencies, document retention obligations are often the most straightforward. The contractor’s cost risk is internal, and the Government’s primary interest is in verifying compliance with pricing and billing requirements, past performance, and any audit rights incorporated by clause. For many FFP awards that do not involve certified cost or pricing data, the main retention concern is the three-year period after final payment, with attention to retaining proposal files, subcontract files, correspondence, quality records, and key financial documentation that fall within the FAR 4.705 categories. Because there are no indirect rate settlements tied specifically to the contract, contractors will often align destruction of contract-specific records with the general three-year period, while leaving broader financial ledgers and system records in place according to the 4.705 tables.

The analysis changes for cost-reimbursement contracts such as cost-plus-fixed-fee (CPFF) and other cost-type instruments. Here, the Government’s interest in indirect cost rates, allocation methods, and allowability is significantly heightened, and so is the practical need to keep a more expansive universe of records. FAR 4.703 expressly links retention periods to the timing of final indirect cost rate proposals under the Allowable Cost and Payment clause, extending the regulatory periods whenever those proposals are late.(Acquisition.GOV) Because final indirect rates are often negotiated and audited years after the end of the fiscal year in which costs were incurred, many contractors adopt a conservative approach: they maintain cost-type contract records and supporting accounting documentation well beyond the bare FAR minimum, often until both the rate years and the contract itself have fully closed and any related claims or disputes are clearly time-barred under the Contract Disputes Act. The underlying retention rules are the same, but cost-type contracts make the theoretical risk of premature destruction much more concrete.

Time-and-materials (T&M) and labor-hour contracts sit somewhere between FFP and cost-type instruments. The contractor is typically paid fixed hourly rates for labor and reimbursed for certain materials, which means pay administration records and acquisition and supply records become particularly important. FAR 4.705-2 establishes retention requirements for pay administration records, while FAR 4.705-3 addresses acquisition and supply documentation.(Acquisition.GOV) For T&M contracts, it is prudent to ensure that timesheets, labor distribution reports, and related payroll documentation are retained for at least the applicable FAR periods, and longer if the contract is subject to labor statutes such as the Service Contract Act. Material invoices and support for pass-through costs should likewise be retained according to the specific acquisition and supply retention periods, some of which extend to four years. In practice, contractors often default to a four-year retention standard for T&M supporting records, and then overlay any program-specific or agency-specific requirements.

Construction contracts, whether FFP or another pricing arrangement, bring their own layer of complexity. Although the fundamental FAR Subpart 4.7 rules still apply, construction work is frequently subject to labor standards such as the Davis–Bacon Act, additional wage-determination enforcement mechanisms, and more intensive oversight of payroll and certified payroll records. While FAR 4.705-2 establishes general pay administration retention periods, other statutes and regulations may, in effect, lengthen the time that construction payroll records, fringe benefit documentation, and apprenticeship records must be kept. From a risk-management perspective, many construction contractors harmonize their practices by retaining all construction payroll and subcontractor payment records for at least the longest applicable period across both FAR and labor-standards requirements, rather than attempting to disaggregate by statute.

The civilian versus Department of Defense distinction is less about core FAR Subpart 4.7 principles and more about supplemental clauses and program-specific expectations. DFARS provisions can impose additional or more detailed audit rights or data requirements, which may indirectly affect document retention practices, particularly for contracts involving sensitive technical data, cybersecurity, or major weapon systems. Moreover, certain programs include longer contractual retention periods. For example, guidance for the GSA SmartPay program, while not a DoD program, illustrates how individual contracts can require contractors to maintain electronic records of all transactions for six years after final contract payment, in addition to meeting the FAR 4.703 requirements.(GSA SmartPay) Equivalent or even longer periods may appear in cyber, intelligence, or logistics contracts on the DoD side, so contractors cannot safely assume that three years will always suffice simply because the FAR establishes that as a general rule.

A further complication arises in portfolios where the same financial or procurement system supports multiple contract types. FAR 4.704 recognizes that records from different categories may be interfiled and notes that where screening is impractical, the entire record series must be retained for the longest applicable period.(GovInfo) In practice, this means that if a contractor’s accounts payable files support both a cost-type DoD contract and a civilian FFP contract, and if that record series is not easily separated, the longer retention period dictated by the cost-type work effectively governs. This reality often leads contractors to adopt uniform, conservative retention periods at the system level and then design more granular destruction rules only where systems and filing structures clearly segregate record types.

Electronic storage and imaging add another dimension, but they do not eliminate the underlying retention duties. FAR 4.703 permits the use of imaging and electronic storage provided that the process preserves accurate images and maintains an effective indexing system; it also requires that original paper records be retained for at least one year after imaging to validate the system.(Acquisition.GOV) For different contract types, the technical approach to electronic records management may look the same, but the consequences of a failure—such as being unable to produce cost records for a CPFF contract audit—vary substantially in scale and impact compared with an uncomplicated FFP service award.

Across all of these contract families, the common thread is that document retention is ultimately driven by record function, timing of cost entries and payments, and the specific audit and program clauses in each contract, rather than by the pricing label alone. For firm-fixed-price civilian contracts, a well-implemented three-year-plus policy anchored in FAR 4.703 and 4.705 may be adequate if no special clauses apply. For cost-reimbursement and time-and-materials contracts, especially in the DoD environment, a more cautious approach that ties destruction to the final resolution of indirect rates, closeout, and any potential disputes is often warranted. Construction contracts and contracts subject to special program supplements can demand still longer retention for certain payroll, safety, and technical records.

For federal contractors seeking to implement a defensible records retention schedule, the academic distinction between contract types should be treated as a starting point rather than an end point. A rigorous policy will read across FAR Subpart 4.7, examine each major record category in FAR 4.705, identify contract-specific or agency-specific clauses that lengthen the period, and then overlay the practical realities of system architecture and audit risk. Only then can the organization translate the abstract requirements into concrete, contract-type-sensitive instructions that will withstand scrutiny years after closeout.

Disclaimer: This article is for informational and educational purposes only and does not constitute legal advice. It is not a substitute for reviewing the specific terms of your contracts, the FAR, agency supplements, or for consulting with qualified legal counsel about your particular circumstances.