For most of us, our basic human characteristics typically carry over to our business practices and professional conduct. The habitually neat tend to discard "unnecessary" paperwork to maintain uncluttered workplaces, while packrats tend to surround themselves with superfluous paperwork. Many of us are uncertain of how long documents should be retained and whether or not to discard certain project documentation such as forms, records, and drawings. Not knowing which documents to save and for how long could mean enormous expenditures of time and money in the event of a claim. Therefore, it makes good business sense to implement and adhere to a written record retention policy.

Why Retain Records?

Most accumulated documentation, such as accounting records, contracts, and standard operating procedures, is vital to a firm’s business operations. Therefore, it is critically important to manage this vital documentation in a systematic process that can be easily recalled. As professionals serving the public, you may be called upon to retrieve a closed file because of an alleged claim at any given time, and an alleged claim may not emerge for two or more years after the project is completed.

Let’s face it, professionals enjoy doing what they do best. Most professionals are busy managing projects and find it too time-consuming to keep meticulous records in the event that a client, with whom you may have had a successful prior working relationship, decides to file a claim. But think about it -- after five years it would be difficult to recollect specific project activities in defense of a claim. Record retention could mean the difference between a devastating outcome to a lawsuit and a more favorable one. The devastation may include performing time-consuming defense preparation activities during billable hours, which diminishes profits. According to statistics generated by the American Consulting Engineer’s Council (ACEC), engineers spend one million hours of billable time each year defending themselves against lawsuits. ACEC firms spend an average of 220 billable hours on litigation each year. Keep in mind that time spent to manage documentation during the project life cycle is billable. Once the project is completed, this task becomes overhead. Consider also that poor recordkeeping could damage a firm’s reputation. If during the discovery period it appears that several subpoenaed files are "missing," more time may be spent during the trial defending your professional competence than focusing on the credibility of your project activities.

Following the notification of impending litigation, each party is permitted to request documents for review, conduct interrogations, and take depositions during this period of discovery. If it is determined that the defendant has deliberately destroyed project documentation requested during the discovery period, the plaintiff has the right to inform the jury of the defendant’s actions. This could weigh heavily against the defendant, if the jury assumes that the defendant is "hiding something." If it can be clearly determined that the defendant’s actions were consistent with a pre-existing Record Retention Policy that directs the destruction of documents after the documents have reached their specified life term, then the jury need not be informed. However, legal experts agree that even with a formal document destruction policy, critical project documents that support the defendant’s position during litigation may be destroyed. In addition, destroying documents that may be relevant in litigation could be construed by the plaintiff’s attorney as improper destruction of evidence.

What Information Should You Include In Your Record Retention Policy?

A Record Retention Policy should be a written standard operating procedure that is designed to properly manage information and data storage. Its purpose should not be to deliberately purge documents for fear that the information could be introduced as evidence in a lawsuit. The policy should address the retention of written documentation such as contracts, proposals, invoices, letters, and reports, as well as information transmitted through other means of communication such as telephone conversations, e-mail messages, and meetings. The policy should also include guidelines for auditing project files, and the policy should be reviewed periodically to ensure that it is current with the requirements of state and federal laws, which have retention schedules for various types of documents. Keep in mind that project file documentation may be your sole source of defense during litigation.

Paper Versus Electronic Documents

According to a survey posted by the Municipal Research and Services Center, 90 percent of companies in the United States with more than 1,000 employees rely on computer technology, such as internal e-mail systems and Internet access, in the workplace. Since the storage requirements of electronic documents are not dependent upon physical storage issues, there may be the temptation to retain more information than necessary. The physical storage of paper information and the cost of storing accumulated paper files decreases with the use of electronic storage media devices such as tapes and large capacity file servers. However, legal experts report that electronic documents are not readable after a period of approximately seven (7) years due to advanced technology and the potential deterioration of hard drives and storage tapes. Therefore, paper copies are considered more reliable. In any event, project documentation, whether stored on electronic media or as paper copy, is subject to the risk of discovery during litigation. Destroying project documents will reduce the expense of storage, but may not necessarily help to defend a claim.

Which Documents Should You Maintain?

Generally, project files should be complete and consistent with guidelines established in the Record Retention Policy. There is a misconception among some professionals that the contents of project files can be harmful and, therefore, less information under the scrutiny of an overzealous attorney is better. One day it may be necessary to build a defense against an allegation of negligence, and it will be difficult to prove your credibility with insufficient documentation. In addition, your recollection of past events as well as the actions of an ex-employee who managed the project may be insufficient to support your defense.

One professional association advises permanently maintaining the following documentation in the project file:

• contract
• proposal (final)
• letters of transmittal
• client deliverables
• calculations that support final data
• telephone logs
• e-mail messages
• client meeting notes

Other project file information should include labeled photographs, invoices, lease/rental agreements, calibration logs, meeting attendance records including a summary of items discussed, and subcontract agreements. If a formal contractual agreement is unavailable, then include a copy of the letter indicating authorization to proceed with services on a given date as per the dated proposal, assuming that the fully executed proposal is the contract. You may want to invest in a color-coded or multi-part folder filing system to segregate administrative records and project records to facilitate document retrieval. Generally, some records, such as internal draft documents, both paper and electronic copy, should be maintained temporarily during the project life cycle, then discarded upon project file closeout. However, some government agencies may require the retention of all draft information.

As a note of caution, internal draft documents could be used to discredit your professional judgment particularly if the notes contain differing or personal opinions. Keep in mind that your hard drive can be subpoenaed during discovery; therefore, electronic documents containing non-professional commentary can be seized. However, you may want to consider maintaining draft documents that contain revisions generated by clients or their official representatives. Some experts advise that field logs, diaries, or journals should be discarded, especially when a field report is generated from field notes, as they can be misinterpreted or used to demonstrate an error in judgement.

How Long Should You Retain Records?

According to one legal advisory report, a general rule often cited for document retention is to consider the relevant statute of repose plus one year, as well as other laws that exist in the state(s) where the company is doing business. The additional year is a buffer period since in many states the statutes have been challenged and in some cases rejected. Statutes of repose vary from state to state. The statutes of repose should be used as a minimum requirement. Use your judgment to determine the aspects of the project information that require longer or even permanent retention. See the accompanying partial list of state statutes of repose, which illustrates the variance among state requirements.

A final note to keep in mind: At some future point in time when your key project personnel have relocated without a forwarding address, your records will determine your credibility, protect your reputation, and limit your financial obligation in the event of a claim. How you manage your records reflects on your firm’s commitment to quality and impacts your bottom line.