Precision instrument component R&D drives success and global competitiveness for Macfab and its customers alike

Canada’s Scientific Research & Experimental Development (SR&ED) tax incentive program helps drive Macfab innovations in precision instrument component R&D, manufacturing, cleaning, assembly, testing, and quality assurance


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Precision instrument component R&D is a win-win proposition for Macfab, its customers, and for Canada

Like most G7 nations, Canada offers a variety of programs designed to help develop and grow its industrial base. Its Scientific Research and Experimental Development (SR&ED) tax credit program provides a financial incentive to assist businesses in their R&D initiatives. Over the past decade, Macfab has become a textbook example of how the SR&ED program can help reduce the risks – and reap the rewards – of product innovation.

Manjit Kochhar, manager at Ernst & Young’s SR&ED and Business Tax Incentives practice: “From a Canadian company point of view, it’s very important for them to innovate – from a manufacturing standpoint and a product development standpoint – in order to remain competitive in a global environment.

“For a company like Macfab, which likes to take on challenges head first, the SR&ED program marries very nicely. It’s designed to help companies take that risk in technology, then take those technology advancements and apply them to other products and processes down the line.”

The SR&ED program, which in Macfab’s case also includes support from the Ontario government, provides a tax refund of up to 30 percent of eligible R&D costs. The experience gained through this research has helped Macfab solve many of their customers’ most daunting technological challenges.

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“Essentially what we’ve done, we’ve taken something that was a nightmare to other manufacturers and turned it into a gem.”


Precision instrument component R&D - Macfab

Macfab has worked with Ernst & Young’s SR&ED practice for nearly 10 years on numerous R&D projects

R&D ROI? The proof is in the products, processes, and customer solutions

R&D normally involves more failures than successes, but from an SR&ED standpoint, failure definitely is an option. Charles Day, Macfab’s director of research and development: “We learn new things to do, but more importantly, we learn what not to do. It reimburses us for being experimental. We’ve developed expertise in a number of areas as a result of this R&D. “We’ve now got a number of manufacturing cells and services that we wouldn’t have otherwise been able to offer.”

“Failure is not looked upon poorly,” says Manjit Kochhar. “Projects can fail and still be eligible for the program.”

 Macfab has had its share of R&D failures but these are more than offset by its long list of technological accomplishments. To Manjit, one of the best of Macfab’s many R&D-driven success stories advancements is its advances in cleanroom-based precision cleaning. “Macfab invested a lot of time and resources into developing this technology – the ability to clean and assemble parts in a very stringently clean environment.”

Precision instrument component R&D

Thermally bonded assembly

Macfab’s cleanroom capabilities have become a major competitive advantage. These processes and services also deliver significant benefits to Macfab’s customers. Charles Day offers this example: “One of our customers had an instrument that took up to several weeks to stabilize due to trace levels of contaminants, primarily PDMS (polydimethylsiloxane) in the analytical stream. Through experimentation, we customized a solvent blend, and customized cleaning process approaches, to target the contaminants. Then we went through the system, component by component, applying the cleaning processes.”

“From the customer’s standpoint, we got the stabilization time for their instruments down from a number of weeks to a matter of days. Macfab developed that expertise and we are able to apply it to other situations as a service to other customers.”

Another great example, says Manjit, is Macfab’s micro-ionizers: “From the assembly point of view, Macfab has made a lot of inroads with ionizers used in portable ion mobility spectrometry.” Charles Day adds, “The development of the micro-ionizer, the ability to manufacture it, resulted from R&D of about two and a half years.”

Precision instrument component R&D

Micro-ionizer

 SR&ED at a glance

As its name indicates, the tax credit program is specifically aimed at the experimental aspect of commercial R&D. This is where the greatest risk lies – but also the greatest opportunities. That, as Manjit Kochhar explains, is exactly where the SR&ED program comes into play:

“Once a company encounters a technology barrier or limitation – that is, when currently available technology can’t readily assist, and there’s no sufficient information available in the public domain to help them rectify it – they would have to take on a series of experiments to help them overcome that obstacle. That’s where government has come to incentivize companies to be able to take on that risk, to do that repetitive testing – to increase their overall knowledge base and the knowledge base of Canadian companies.”

How Ernst and Young helps

Manjit Kochhar has worked with Macfab on their SR&ED applications for more than eight years. His team at E&Y provides specialized expertise (including scientific and engineering as well as financial and accounting consulting) at each stage of the government’s tax-related programs, from claim planning, preparation and process management to tax auditing.

Just as the technical complexities of the R&D have increased, so too have the SR&ED program’s eligibility requirements, says Manjit. “The writing of the technical reports that are submitted for review have become much more involved. From that perspective, one of the levels of expertise that we provide is in understanding what the current technology landscape is, and helping a company understand what could be considered a sufficient technology barrier.

“There’s also the costing portion, to determine what costs are eligible, how to make sure that we’re capturing all possible eligible costs. The third piece of that is documentation, because if the CRA does come out to review or audit a claim, they expect sufficient documentation that is able to demonstrate both technological eligibility as well as justify the costs of the claim.”

Where the research hits the road: The customers always win

Charles Day has worked on every one of Macfab’s SR&ED applications, and he is a big supporter of the program. As reflected in his project examples, Macfab’s customers benefit as much, if not more, from the resulting research:

“Our ability to zero in on some niche markets and do things that other shops can’t, the end result of that comes from the R&D. This is now one of the value-adds that we can offer. Our customer benefits from our developing that knowledge.”

“Essentially what we’ve done, we’ve taken something that was a nightmare to other manufacturers and turned it into a gem.”

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To learn more about Macfab’s precision instrument component R&D accomplishments and other capabilities, visit our Library page here.