"Record retention article"
UNIQUE ASPECTS OF RECORD RETENTION POLICIES FOR CONSTRUCTION COMPANIES If something positive came out of the Enron and Morgan Stanley debacles, it is that businesses now know the importance of implementing a sound record retention policy and closely following that policy before there’s a hint of trouble. However, once a sound policy is adopted, failing to abide by that policy can be a company killer. Even though the Supreme Court recently overturned Arthur Andersen’s conviction in the Enron matter, Arthur Andersen is, essentially, defunct. Because of this type of negative consequence, construction executives need to be closely involved in the formulation of their company’s record retention policy and compliance with this policy. The intent of this article is not to provide an exhaustive list of the different documents construction companies must retain or a precise document retention schedule. My intent is to provide some insight, from one construction professional to another, into some of the unique record retention issues construction companies may face during the ordinary course of business. Hopefully, this will help you spot issues before they turn into problems. A good first step in determining what laws, regulations and other business requirements you need to address in your record retention policy is to list all the different governmental bodies and other organizations that your company comes into contact with during the course of your business operations. It is a lot more than you think. Many of these organizations have their own record retention requirements. Using this list as your baseline, start researching each entity to determine if they have any applicable record retention requirements. Some of the governmental bodies and other organizations that you will or may come into contact with are federal and state OSHAs and EPAs, the Corps of Engineers, Departments of Transportation, Building Departments, railroads, utilities, testing agencies, and insurance companies. If your company is listed on one of the stock exchanges, the Exchange may have record retention requirements that need to be followed. Equipment and material manufacturers, such as HVAC equipment manufacturers and roofing material manufacturers, may require that certain records, such as installation records, inspection reports and approvals, and maintenance records, be retained for specific periods of time to substantiate a warranty claim. This task may seem daunting, but it is necessary to help minimize any potential risk years down the road. In my experience, construction companies do a pretty good job of organizing their project’s paper files and segregating them by document type (e.g. contracts, submittals, correspondence, RFIs, payroll, safety, etc.). Just about every project manager or superintendent has been burned at one time by his or her failure to adequately have a handle on the project documentation, and this unfortunate experience spurred them to more diligently manage the “paper trail.” However, in today’s construction market, more and more companies are embracing project management software packages, such as Prolog Manager® and Plans & Specs®, to enhance the efficiency of their management teams. These software packages come with a whole new set of issues. These types of software packages allow project team members, from the owner and general contractor to the subcontractors and suppliers, to communicate and generate project documentation that is centrally stored in an electronic database that is usually accessible by the team members via the internet. The types of information and electronic documentation that are CHICAGO 309889v1 99999-00001 generated by these software packages and stored in these databases include just about every type of document that traditionally had been generated in the past on paper, including contracts, subcontracts, purchase orders, change orders, potential change orders, RFIs, submittals, meeting minutes, daily reports, correspondence, etc. These software packages also give the project team members the ability to use different types of electronic devices to generate this information, from desktop computers, to laptops with wireless cards, to PDAs or other wireless devices. These software packages give rise to a number of new issues that need to be addressed in your corporate record retention policy. Is the information that is generated on a superintendent’s PDA or other wireless device a business record? Do your employees use electronic means to quickly communicate with each other, such as via instant messaging? Are electronic signatures sufficient? In what format should these documents be? What kind of training do my employees need? Answers to these and other document retention related issues often require outside assistance in order to make sure all legal requirements are met. The construction industry is a dynamic, thriving industry in which it is quite easy to overlook mundane corporate compliance issues such as record retention because your main concern is building your current project and looking forward to the next big one. However, failing to actively manage your record retention efforts could end up ruining everything you’ve worked for. Don’t let this happen to you. CHICAGO 309889v1 99999-00001