10 April 2019 #Construction
The construction sector is changing. The Hackitt Report and subsequent “Building A Safer Future” Implementation plan, digitisation, BIM and off-site manufacturing are all influencing methods and approaches to new building.
Our thought leadership event series, Changing the way we build, placed a changing sector under the microscope. Together with ForrestBrown, the largest specialist R&D tax credit consultancy in the UK, we revealed how new regulation is driving significant opportunities and risks for construction businesses. We also examined the established source of funding that has been hiding in plain sight.
First on the agenda was the Hackitt Report. Dame Judith Hackitt’s Review of Building Regulations and Fire Safety was commissioned in the aftermath of the Grenfell Tower tragedy. It examines the regulatory framework pertaining to design, construction and maintenance, and the ongoing use of buildings, focusing on high-rise buildings (over 30m) with occupancy.
In it, Dame Hackitt concludes that the existing regulatory framework is not fit for purpose and made a substantial number of recommendations – 53 in fact. One of these recommendations was for a ‘golden thread of information’ about buildings to be adopted – a digital-by-default standard of record keeping during a building’s lifecycle, i.e. Building Information Modelling (BIM).
In the first instance, this would provide more standard digital record-keeping for the design and construction of buildings. It would also ensure information is maintained and updated throughout the period of the building’s operation. Of the many benefits to this, enhanced safety would be foremost.
The golden thread in construction
This ‘golden thread’ identified in the Hackitt Report runs through three of the most important contemporary construction industry developments, namely: reform of The Building Regulations 2010; BIM, and the Construction Sector Deal.
The Construction Sector Deal is part of the government’s Industrial Strategy. It paves the way for investment into, and development of, the construction sector. The government has set aside funds for innovation in construction and money already awarded has gone to projects ranging from research into the use of off-site manufacture in housing developments, to AI in design and new piling technologies. R&D tax credits are explicitly named in it as a means of helping construction firms to fund projects making construction greener, safer, smarter and cheaper.
The wider implication of this golden thread is that more and more fascinating change is in store for the construction sector, especially as it seeks to solve some of its more persistent challenges.
The impact of BIM
Following the government’s 2011 mandate, BIM has been obligatory on centrally-procured public sector projects in the UK since 2016. As the sector becomes increasingly familiar with BIM and the benefits it can bring, private sector uptake has also increased.
BIM is the processes of collecting, modelling and exchanging information throughout the lifecycle of a built asset. The principle is not a new one. Other industries, aerospace for example, have had those sorts of processes in place for some time.
Five things to consider in your BIM contracts
Clarkslegal is being asked more and more by clients, consultants and contractors to advise on the legal implications of BIM.
What challenges does the construction industry face?
To prompt discussion, we started each of our events with a poll to identify the issues at the heart of the construction industry. The results speak for themselves:
Nearly half of companies attending (45%) said that the biggest threat to the industry’s success in the next five years is ignorance of guidance. That is, ‘Regulatory guidance not always being read, or being misunderstood and misinterpreted.’
According to our audience, the industry’s most significant challenge is the skills gap. 60% said they lack the skilled technicians they need in order to succeed.
Funding the future of construction
R&D tax incentives can help. Highlighted in the Construction Sector Deal, construction firms can use R&D tax credits to fund their most challenging projects and to meet the costs incurred. Established in 2000, R&D tax incentives are an established source of funding and are not dependent on EU funding in any way.
R&D tax credits shelter profit from tax or provide a cash credit. They are worth up to 33p in every £1 spent. The average claim value for an SME in 2016-17 was £53,876 and for a large company £272,881. A company can claim every year and for up to two years retrospectively.
Why does the government invest in R&D tax credits?
The government’s aim is to promote private sector investment in innovation. The reason for this is simple: for every £1 spent on R&D tax incentives, up to £2.35 in extra R&D investment by UK companies is stimulated.
This is because businesses often spend the benefit they receive on funding the next big push in their R&D work. This can involve hiring new skilled staff, expanding their premises, or investing in new machinery. The UK economy benefits from this increased productivity as a result. Which is why the government’s Construction Sector Deal aims to increase total research and development (R&D) investment to 2.4% of GDP by 2027.
Private sector investment in R&D stimulated through R&D tax incentives
What counts as R&D?
In construction, R&D takes place in all different types of firms; structural-, civil– and electrical engineers; materials experts and suppliers; HVAC businesses; housing developers; architects; construction manufacturers and contractors.
The sector is also full of challenges and technical uncertainty that require inventive solutions. R&D activities usually relate to the innovative use of materials or overcoming bespoke problems on site. So, if you are experimenting with new or improved materials, processes or techniques – it’s likely your business could benefit. Look out for the following three indicators of R&D activity:
A question that came up again and again at our events was: ‘How do I know if what I’m doing is R&D if my competitors are doing it as well?’
You can begin to consider your work in terms of R&D if you:
To help construction firms, ForrestBrown identified four opportunities for the construction industry; a way of thinking about whether or not their work might qualify. Their advice was, if you’re seeking an advance in one of these categories, you’re probably carrying out R&D that would qualify for R&D tax credits.
Opportunity 1: Greener
Have you been asked to deliver a project in a more energy-efficient way? The expectation and demand now is for better performing materials and buildings, built at a lower environmental cost, without risk of harm to wildlife or pollution of air or waterways. One civil engineer client of ForrestBrown repaired a 1970s weir close to wildlife conservation activities and this project was full of R&D.
Opportunity 2: Faster
Are you tasked with building faster than ever before? Perhaps you’ve had to pivot to meet additional scope after the project has begun. One ForrestBrown client was able to offsite manufacture a curved concrete structure and then assemble in situ to save time and money (rather than wait for various cement segments to ‘go off,’ before progressing). This was significant R&D.
Opportunity 3: Safer
Are you trying to improve safety standards? Whether it’s to meet new health and safety requirements or your own guarding against injury on site. There’s a lot of R&D in safety, during both a building’s construction and occupied phases. One ForrestBrown client claimed R&D tax credits for their class 0 fire-retardant paint for doors. The paint was safe but also needed to maintain the correct aesthetic and meet stringent regulatory standards.
Opportunity 4: Cheaper
Are you trying to build more cheaply? This might include: efficiencies of scale like offsite manufacturing of fully- or part-assembled components. You might be exploring different materials for improved cost or minimising disruption to other infrastructure. ForrestBrown has a structural engineering client who developed new ways of directional drilling to avoid the closure of key roads. This was R&D.
Digital construction technology
Construction’s digital transformation is already underway. That’s evident in the rise of BIM and the data that BIM creates. BIM processes – generating developed digital designs and associated non-graphical information – are critical for other construction processes such as offsite manufacture. Data from drone, robotic, and LIDAR surveys on site can be fed into BIM models and used to help develop designs taking account of site constraints and also verify construction progress.
R&D is not limited to digital transformation technology like this but there is a big R&D opportunity in these sorts of digital solutions. This view was supported by our audience, who saw digital technology as the #1 opportunity for the construction industry (56%).
The use of artificial intelligence (AI) in construction is limited but is increasing. A number of solutions are being developed to:
Where once teams of people might have performed row-by-row inspection for maintenance, now this has taken to the skies. Drones fitted with precision instruments are being deployed to monitor and survey from above.
Construction is obviously incredibly labour intensive, with concern regarding a shrinking labour force and growing skills gap within the construction industry. Portable robotic arms can be brought on site to perform almost any repetitive physical activity, whether laying bricks, setting out and tying rebar, or moving materials. Rovers can now carry out site inspections, to check welds for defects or compare construction progress with designs.
Perhaps more than any other new technology, BIM – and the technological developments that rely on and feed into the data created by BIM processes - is really beginning to take off. A common question we receive is, ‘Does BIM count as R&D?’. The answer is that BIM does not qualify in and of itself. Typically, there are a few BIM software packages that are ready to use straight out of the box.
BIM is, however, a reliable indicator that R&D may be taking place. The ‘data exhaust’ created by BIM is often used to create something genuinely new, improved or better.
The future is bright for construction
Legislation, technology and investment have all arrived, as the way we build changes. The final pieces in the jigsaw are the way construction firms are protected from risk and the way projects achieve meaningful funding. The opportunity is clear now. The quickest route to opportunity even clearer.
Construction specialist law firm Clarkslegal protect businesses against a full array of emerging legal risks associated with construction’s rapid transformation. If you’d like to discuss further, contact David Rintoul on email@example.com or call 0118 9604675 or your usual contact in the construction team.
R&D tax credits can help fund a bright future for construction. If you’d like to discuss whether you qualify, or how you can maximise your existing R&D tax credit, ForrestBrown can help: email director Alex Price on firstname.lastname@example.org or call 0117 926 9022 to find out more.