Quoting Sheet Metal Work by the Numbers
Chapter 9 of 10 · 10 min read
Risk and the quote review
Price what can go wrong as an explicit, listed allowance, review a quote line by line against its sources before it goes out, and catch an aluminium price entered ten times too low.
Every quote is a forecast, and forecasts are wrong in both directions, sometimes by a lot. Parts are scrapped, assemblies need rework, a coating comes back thin, material prices move, a new product takes longer to learn than expected. A shop can allow for these in two ways: by padding every line a little, so that nobody knows where the allowance is or how large it has become, or by pricing them openly, as a risk allowance with its contents listed. The second is better, because it can be checked, adjusted for each job’s real risks and compared with what actually happened.
This chapter builds EN-700’s risk allowance from its parts, then sets out the review that every quote should pass before it leaves the shop. The running case finds, in that review, that the aluminium sheet’s price had been entered as A$0.95 per kilogram instead of A$9.50, a slip that would have under-priced each enclosure by about A$33.
What can go wrong
For a sheet metal job, the usual risks are:
- scrap: parts spoiled in cutting, folding or joining, to be remade;
- rework: assemblies that need correction before they pass inspection;
- finishing rework: coating faults sent back to the coater;
- material price movement: sheet or aluminium prices rising between quote and purchase;
- learning: a new product taking longer than the estimate, especially in its first batch;
- customer-supplied items: late or faulty items holding up the job.
Some are best priced as a percentage, some as specific amounts, and some are better handled in the quote’s terms, such as material price adjustment clauses or the customer-supplied latch conditions of Chapter 1, than in its price.
The running case: EN-700’s risk allowance
This is an illustration. EN-700’s estimator listed the risks and priced each at 50 off:
| Basis | Allowance | |
|---|---|---|
| Scrap at the brake | 1 part in 100, about A$12 each, ten parts | A$1.20 |
| Assembly rework, first batch | About 2 minutes per enclosure | A$3.17 |
| Coating rework | Occasional recoat and freight | A$1.00 |
| Material price movement | About 1% of sheet and bought-in | A$1.28 |
| Other, including handling damage | Judgement | A$1.91 |
| Total | About 3% of cost | A$8.56 |
The total, about A$8.56 per enclosure, is about 3% of the cost of A$285.48, and it is the 3% that Chapter 8 added before applying the margin. Expressed as a percentage, it can be applied to the other quantities; expressed as a list, it can be challenged item by item. A first batch of a new product deserves more allowance than a repeat batch of a mature one, and the list makes that easy to change.
Known risks and unknown ones
The allowance above prices risks that are known and roughly measurable: the shop knows how often it scraps a part at the brake, how often a coating comes back faulty, how much rework a new product usually needs. A contingency is different: it covers risks that cannot be estimated, such as a design that has never been made before, a process the shop has not used, or a customer whose requirements are still moving. A contingency is a judgement, often a percentage on top of the allowance, and it should be stated as such and reviewed by someone senior, because it is where a quote can quietly become uncompetitive or quietly lose its protection. EN-700, a conventional enclosure made with the shop’s usual processes, needs no contingency beyond its allowance; a first-of-a-kind product with an unusual finish might need one.
Risk at different quantities
The same risks weigh differently at different quantities. At 20 off, the first-batch learning and set-up scrap are spread over few enclosures, so their share per enclosure is higher; at 200 off, the learning is diluted but the exposure to a material price rise is larger in total, because more material is bought. A single percentage applied to every quantity is a reasonable simplification for EN-700, where the risks are modest, but for a job with large learning effects or a long material lead time, each quantity’s allowance deserves its own look.
Who carries each risk
Each risk in a job is carried by someone, and the quote decides who. The shop carries its own process risks, scrap, rework and learning, because it controls them and can price them. The customer is better placed to carry risks it controls, such as late design changes, late customer-supplied items and the call-off schedule of Chapter 7. Risks neither side controls, such as a large movement in aluminium prices, can be shared through an adjustment clause. A quote that silently takes every risk onto the shop is either expensive, because it prices them all, or dangerous, because it does not. EN-700’s quote assigns them: process risks priced in the allowance, customer-controlled risks stated in the terms, material movement beyond 5% subject to adjustment.
Time pressure and the review
Quotes are often due tomorrow, and the review is the first thing cut when time is short. It is also the step that found three of this book’s errors before they cost anything: the finish on the general-notes sheet, the net-area material and the aluminium price. A short review, fifteen minutes with the checklist, is almost always possible, and a shop can make it non-negotiable for quotes above a set value. The cost of the review is a few minutes of a senior person’s time; the cost of skipping it is occasionally a job that loses thousands of dollars.
Allowances are not margin
A risk allowance is not profit. It is the expected cost of things that will probably go wrong somewhere in the job, and on an average job most of it will be spent. Margin is what remains after all costs, including the risks that occurred. A shop that treats its risk allowance as extra margin, and cuts it to win a job, has cut its expected cost, not its profit, and will find the difference in its results.
The quote review
Before a quote is sent, someone other than its estimator, or the estimator on another day, reviews it against a checklist. The review asks whether the scope is right, whether every part and operation is priced, whether every quantity and price comes from a source, and whether the result is plausible.
- Do: Every sheet of the drawing set openedIncluding general notes and title blocks
- Do: Every part and bought-in item on the parts listAgainst the drawings' bills of materials
- Do: Every unit price against its sourceSupplier quotes, current rate table, dated
- Do: Every count against the flat patternsCut length, contours, bends, hems, joints
- Do: Each line once onlyNo fasteners or handling counted twice
- Do: Set-ups separate from per-unit costsOne-off, per-batch and per-unit lines distinct
- Do: Margin, not markup, applied as intendedProfit as a share of price checked
- Avoid: Price compared only with the last similar jobA useful check, but not a review
- Ask: PlausibilityMaterial share, labour minutes and price per kilogram within the shop's usual range
The error: aluminium at a tenth of its price
This is an illustration. Checking each unit price against its source, the reviewer found the aluminium sheet entered at A$0.95 per kilogram. The supplier’s quote said A$9.50. At A$0.95, each 2.0 mm aluminium sheet was priced at about A$14.77 instead of about A$147.74, and the nine sheets at 50 off at about A$2.66 per enclosure instead of about A$26.59.
The slip understated material by about A$23.93 per enclosure, about A$25.85 with the 8% on-cost, and, carried through the 3% risk allowance and the 20% margin, about A$33.28 in price per enclosure, about A$1,664 across 50. The quote’s total would still have looked plausible: its price per kilogram of finished enclosure, its labour minutes and its total were all within the shop’s usual ranges, because the error was in one line among many. Only checking that line against its source found it.
The fix was to make the estimating sheet show, beside every unit price, the source and its date, and to flag any unit price that differs by more than a set amount from the shop’s last price for the same item. A tenfold difference would then have been flagged as soon as it was entered.
Plausibility checks
Plausibility checks are quick and catch large errors in the total, though not, as the aluminium slip showed, every error in a line. Useful ones for a sheet metal quote include:
- material share: material and bought-in items as a share of cost, here about 45%, compared with similar jobs;
- labour minutes per unit: here about 56 minutes, compared with records of similar products, as Chapter 5 did;
- price per kilogram of finished product: here roughly A$18 per kilogram of a product weighing about 20 kg, compared with the shop’s range for similar work;
- price breaks: prices that fall with quantity, and fall less steeply at high quantities, as Chapter 7 showed.
A result outside the usual range is not necessarily wrong, but it must be explained before the quote goes out, and the explanation written on the estimate so that the next reviewer does not have to rediscover it.
Asking production
The estimator prices the job; production makes it. For anything unusual, a part that might collide on the brake, a joint the shop has not made before, a finish with special masking, a delivery date that would need overtime, the review should include a short conversation with whoever will run the job. EN-700’s door, folded with a gooseneck punch, and its coating after assembly were both confirmed this way before the quote went out, as Chapters 4 and 6 described. Production’s view is also the best check on the times: a brake operator who reads “12 seconds per hit” for a floppy 740 mm panel will say at once whether it is realistic. A quote that production has seen is a quote production can deliver, which is the whole purpose of the exercise.
Reading the quote as the customer will
The review should end by reading the quote’s text as the customer will, without the estimator’s knowledge of what was meant. Words that seem clear inside the shop may not be clear outside it: “standard finish”, “as per drawing”, “delivered”, “includes hardware”. Each should be specific enough that a buyer who was not in any conversation could not read it differently. EN-700’s review changed “includes hardware” to a list of the hardware included, and “delivered” to “delivered on pallets to the customer’s loading dock”, as Chapter 5 had already advised.
Recording the review
A review that leaves no record cannot be learned from. EN-700’s estimating sheet has a review box: who reviewed it, when, what was found and what was changed. Over a year, those boxes show which errors recur, such as missed general notes or unit-price slips, and the checklist can be tightened where the errors cluster. They also show, when a job goes wrong, whether the quote was reviewed and what the review saw, which is fairer to everyone than memory.
Declining to quote
Not every enquiry should be quoted. A job outside the shop’s capability, needing a process it does not have or a tolerance it cannot hold, is better declined, or quoted with the uncertain part clearly subcontracted, than priced optimistically and then failed. A job whose scope cannot be pinned down despite questions is better given a budget price, as Chapter 1 described, than a firm one. Declining politely, with the reason, often earns more respect than a quote that later goes wrong, and the customer may return with work that suits the shop better.
Risk in the terms
Some risks are better placed in the quote’s terms than in its price. A material price adjustment clause shares the risk of a large movement fairly; a stated lead time “from receipt of approved drawings and customer-supplied items” puts the risk of late information where it belongs; a validity period limits how long the shop is bound by prices that may change. Pricing every such risk into the price makes the quote less competitive and does not remove the risk, only the customer’s visibility of it.
Exercise: a first batch with more risk
EN-700’s first batch is a new product for the shop’s team. Suppose the estimator doubles the assembly rework allowance to about 4 minutes per enclosure and the scrap allowance to two parts in a hundred, leaving the other risk items unchanged. What is the new risk allowance at 50 off, its percentage of cost, and the new price at a 20% margin?
Worked answer. Assembly rework becomes about 4 × A$95 ÷ 60 = A$6.33, and brake scrap about A$2.40. With coating rework A$1.00, material movement A$1.28 and other A$1.91, the allowance is about A$12.92 per enclosure, about 4.5% of the A$285.48 cost.
The cost including risk becomes about A$298.40, and the price at a 20% margin about 298.40 ÷ 0.80 = A$373.00 per enclosure, about A$5.44 more than with the standard allowance. Whether to quote it depends on the shop’s confidence and the market; the list makes the reasoning visible, and the comparison with the actual rework in Chapter 10 shows afterwards whether the extra allowance was needed. If it was not, the next quote for a similar new product can carry less; if it was, the shop has learned what a first batch really costs it, which is worth more than any single job’s margin.