engineering service firms

[EE00]

I work for a small company, and we decided to hire an engineering firm to help us with prototypes and designs, I need some tips on the process of how they write up there price quote and how to negotiate the price with them.
For example we know that this product will have a final cost of $3000.00 and they ask for $70,000.00 !!!!!!

If you know if any Engineering firm or websites please inform.

thank you

 

[Ashereng]

The final price tag of the item may not have a bearing on the development costs.

A single Advil pill costs pennies, now. The R&D budget I am willing to be was a bit more.

If you want to know how a company comes up with what they are charging you, the first thing I would do is ask them to explain it to me.

"Do not worry about your problems with mathematics, I assure you mine are far greater."
Albert Einstein
Have you read FAQ731-376 to make the best use of Eng-Tips Forums?

 

[KENAT]

Simplistically you need to amortize the up front development costs across a 'low estimate' of the likely number of production units.

$70,000.00 up front costs divided by say 1000 units suddenly isn't so bad. If on the other hand it’s a one off I think you need to think again about the $3000 price tag.

The more you detail what you want them to do the easier it is for them to cost it. If you have poor project definition they need to allow for that 'risk' in their quote, or they put lots of assumptions and exclusions in their quote which from what I've seen tends to be frowned on in management school.

Setting the selling cost before you know how much it will cost to design & make it is a bit backwards from my point of view. However, knowing roughly what price the market will stand is an important figure, it can help drive you to redefine your requirement or other factors effecting final price.

Re-look at your requirement, shop around as best you can and get several quotes. Bare in mind not just the price of the quote but the likely quality of work and what they said they’ll do for that money. For instance, at the end of the contract do they own the design or do you, are the drawings going to be to your companies standards, do you need electronic copies of the CAD files or just prints of the drawings, if you want e-copies do they need to be a certain format or CAD system etc.

Also, try not to double post especially in the same forum it gets confusing.

 

[KENAT]

One more thing.

Sometimes when a company is asked to bid on a job but doesn’t actually want to win it they’ll submit an unrealistically high bid rather than just say no bid.

I suspect the thinking is that it’s better to lose a bid for being too expensive than by saying you’re not interested. Not quite sure I agree with the logic but it does happen.

 

[IRstuff]

Please refrain from double posting.

TTFN

Eng-Tips Policies FAQ731-376

 

[zcp]

What was your original budget for the work? Where was their bid in relation to the competition? In rereading your post I assume you only have the one bid and got a little sticker shock.

To give you a little window into proposals from an engineering firm, my company's process is the following:
- review project with client
- clarify requirements
- agree upon a scope of work
- prepare price based on the different personnel required (from $50 to $200/hr depending on the personnel), the number of hours needed with factors for less than 100% efficiency + travel, any tools or consumables, and finally a factor based upon the client and industry
- provide proposal including all of the information above

As a tip for negotiating, speak up if you don't feel you are getting your money's worth. Just be prepared for the reasons that come back. As you can see from the process listed above, the largest cost factor could be due to your attitude / understanding of the scope / wanting to look over their shoulder / time needed to educate you / etc.

You must understand as a client that part of the price is dependent on you and whether you work together as a team for a common goal or bicker over items / time / costs. If you are clear, upfront, and helpful your cost may come down......or you may have asked for more work than you really needed.


ZCP

http://www.phoenix-engineer.com

 

[EE00]

Thanks all to your input.

Can you give me some references to engineering firms.

 

[davsy]

Whar sort of product is it you are looking to design, asking for references to engineering companies could return you a list of thousands. of "engineering companies"

On this forum alone you have engineers who work in everything from electronic circuit boards all the way to nuclear power with every conceivable discipline in between.

If you are looking for a company to design you something like a pressure component for process plant then there is no point using and Aerospace Engineering company, just as if you wanted someone to design you a part for an Aircraft there is no point asking a company that specialize in Nuclear power plants.

There are so many disciplines of engineering that can supply "design and prototype" services, you need to find one that has at least some knowledge of your product.

One other thing, your initial post suggests that you already know that the selling price is going to be $3000, is that because there is already a product on that market that you are competing with or you have already done some market research.