Capital Costs Must be Treated as Indirect Costs

On May 12, 2011, the Armed Services Board of Contract Appeals issued yet another decision in the on-going Todd Pacific Shipyards Corporation appeal for reimbursement of costs associated with dry dock facilities. The Board's decision contained two key holdings: (1) the six-year statute of limitations for a CDA claim for cost recovery does not begin to run until the contractor has submitted an invoice for payment under the applicable contract's payment provisions (here the Allowable Cost and Payment Clause) seeking reimbursement of the amounts at issue, and the government has failed to pay the invoice, and (2) capital costs that benefit multiple cost objectives, such as those incurred by Todd for refurbishing a dry dock used for government and commercial work, must be charged as indirect costs and not direct costs.