Tax Incentives Blog

How R&D Credits Help Construction Embrace Tech and Boost Productivity

Written by Angie Longacre. Updated Jul 26, 2019.

RD_ConstructionTechMartha Stewart: An icon of domestic innovation who made millions with her cuisine and craft creativity.

Snoop Dogg: The gilded gangsta rapper from the other side of the tracks who expanded his music success as an actor, producer, and entrepreneur.

Who would have thought that these two seemingly incongruent personalities would come together to forge personal and professional relationships? Yet they did. And many eyebrows were raised, and guffaws expressed. Despite their divergent beginnings, they’ve found common ground and cultivated that into mutual success with a TV show.

Many people see the construction industry and digital technology just as opposing; never to be compatible – including plenty of construction insiders. The sector sits at the bottom when it comes to digitization: MGI’s Industry Digitization Index ranks construction at number 21 out of 22 industries.

Still, just like the Martha and Snoop paradox, construction and tech can get together to create success.

It’s a Good Thing, Until You Discover a Better Thing ~ Martha Stewart

The sector has always harbored a reputation for being slow on the technological uptake, particularly the average site laborer. Even when a firm invests in developing new technology, often workers drop it in favor of the old, familiar procedures – especially if management neglects to demonstrate the value of the technology and to properly train their staff in its operation.

Without an Open Mind, You Can Never Be a Great Success ~ Martha Stewart

However, technology acceptance is paramount to improving construction processes and procedures. If adapted and used correctly, it can boost productivity through improved efficiency, accuracy, and organization. And right now, the construction industry could use a big bump in productivity.

Independent Project Analysis conducted a study that indicated 35 percent of construction projects experience significant changes during their course.

And major changes cook up inefficiencies and overages. According to the report, 25 percent of project costs rise more than 30 percent; 25 percent go over schedule by 20 percent. Nearly half (40 percent) of mega projects – billion-dollar operations – run over by 40 percent.

Construction Tax Credits: Can You Claim It? Yes, You Can!


If You Stop with General Math, You’re Going to Make General Math Money ~ Snoop Dog

The major contributor? Low productivity. In contrast to many other industries today that have stoked their efficiency and productivity, construction’s has regressed to less than it was 60 years ago.1 The McKinsey Global Institute declares the sector’s situation as an “intractable productivity problem,” costing the global economy $1.6 trillion a year.

At least partly for this productivity climate, the industry can point the finger back at its hesitancy to adopt digital technology. Even seemingly minor gaps and stalls, such as inefficient communication or cumbersome document management, can inflate costs to the tune of 4.2 billion each year, according to one study.2

The development of new digital technologies could help close those gaps and rev up productivity:

  • Improve planning with more data and KPIs
  • Heighten accuracy in plans, records, and inventories
  • Improve organization
  • Enhance communications

The Right Tool for the Right Job ~ Martha Stewart

Of course, developing and implementing technology isn’t free. Fortunately, many pursuits related to improving their processes can qualify for the research and development (R&D) tax credit – which in turn can help fund the very technology a firm implements.

This federal incentive hands out a dollar-for-dollar reduction in a company’s federal tax liability when the firm conducts qualified activities associated with developing new or improving processes, products, techniques, software, or inventions.

So, when a construction company invests in developing technology to improve processes, techniques, and ultimately productivity, it has the potential to qualify for substantial money saving credits.

If You’re Through Changing, You’re Through

For many, that which is different is difficult to embrace. It means letting go of what is comfortable and trusting in the unfamiliar. But often, as many unlikely pairings – harmony and success are what results.

The construction industry’s resistance to change is showing – in high over-budget costs and less than glowing productivity. If the sector takes a chance and strikes up a partnership with digital technology, beautiful things may happen. And the R&D tax credit is there to help them along their way.

One of the best approaches to understand the complexities of the incentive and grab maximum savings is to consult a tax professional.

 

 

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1.   7 Easy Ways to Increase Construction Productivity, Construction Productivity, 2018
2.   100 Construction Industry Statics to Improve Productivity, Construction Productivity, 2018

Topics: R&D Tax Credit

Angie Longacre

Written by Angie Longacre

As a copywriter for CTI, Angie devotes her craft to promoting CTI’s valuable services and benefits for businesses. When she’s not commanding the keyboard, you can find her outside for a run with her dogs, searching for her next antique treasure, dreaming of her next trip to the beach, or lost in a good book.

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