The food industry has seen a huge shift in innovation over the past decade. New trends in the marketplace, with enhanced consumer awareness of additives and health-concerns, have forced companies to adapt and develop new methods in food science and food technology to remain competitive.
In order to retain their global footprint and product diversity, food processing and manufacturing facilities have had to improve existing equipment or lines in order to be more versatile and fluid. This provides an excellent opportunity to capture qualified research costs, assuming that the work can be presented and captured in an efficient way.
In order to meet changes in the market and in product offering through manufacturing or processing, resolving technical uncertainty in the field of food science and/or food technology is required. Food companies often have to achieve a careful balance between taste and nutrition, or produce an acceptable quality of product with different ingredients. The work involved in achieving a commercially viable product and/or process can include a cross-functional team, coming from various divisions within your organization.
Developing food manufacturing processes to be robust, food-safe and efficient requires engineering and experimentation on the shop floor. It is the areas of process development and process improvement that have qualified time, but are not as formally documented as those with the product development teams.
Our BGI technical teams are skilled at identifying existing and new potential areas of Qualified Research Expenses (QREs), while simplifying the process. This methodology includes building the nexus between support activities and costs to qualified projects.
1. Organize the qualified activities into the business component level.
a. This includes developing an understanding of the divisions or departments and the nature of the qualified activities that they are conducting.
b. Review Stage-Gate or NPD systems, and identify the gate-keepers, records and documentation of these processes. Various gate-keepers have qualified time classified as “direct support”, and the records that are kept as part of this process naturally build the nexus.
c. A BGI technical team will then develop a narrative description of the process, and obtain sample documentation to substantiate it. Documenting and discussing every project within the gate system is not necessary. By focusing on one representative example, the qualification of the entire gate system is demonstrated.
d. Evaluate all costs associated with the business components and identify the qualified expenses. For example, often time sensory evaluations are conducted to support and drive the product formulation. Whether a product meets the organoleptic properties and mouth-feel requirements can only be determined by the use of controlled focus or pilot groups.
2. Determine the operational departments who are “directly engaged” or “directly supporting” the business components.
a. In general, plant level or manufacturing Qualified Research Activities (QRAs) for food manufacturers or processors fall into the following categories:
- Running R&D Trials – Direct Support
This includes activities such as developing scale-up parameters, running and monitoring trial batches for the R&D Group, and quality testing of those trials for analysis purposes. Typically, a team member of the R&D group is present during the trials to oversee them. Participation in R&D trials varies depending on a number of variables: available line time, plant level employee experience, environmental factors (humidity, elevation, etc.) and available equipment or product lines. Trial batch costs, including material and labour, can be captured as QREs.
- Plant Engineering – Direct Research
Typically, plants have some degree of plant level engineers or experienced technical maintenance personnel, quality technicians, who are constantly evaluating existing controls and parameters to improve a number of metrics. Most importantly, yield is a prime focus of scrutiny, including, but not limited to, process improvement initiatives to process parameters, control systems, and monitoring/ tracking systems. These are projects that are technical in nature, and experimentation occurs at the facility level.
- Development of Process for New Lines – Direct Support
This includes the design and development for the addition of new lines, where working with the Corporate Engineering group is required to determine capability and limitations. This involves running trials and developing control systems for new product, as well as assisting with front-end engineering for the integration of new equipment and technologies into the facility.
By eliminating the need to report on every single project, the efficiency of the overall R&D Tax Credit Study is significantly increased. By identifying qualified projects and support work conducted by operations or manufacturing staff, the pool of R&D expenses is increased, ensuring a maximized claim.
BGI’s Technical experience allows for your technical and operations team to have minimal and efficient interaction on this project. Developing a more efficient way to report and track projects is always wanted and well received by the entire staff. This will ensure enthusiastic support for the process on an annual basis, and the identification of additional projects.