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To contact us: |
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Phone: 408-855-8208 |
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Pricing and Project Structure |
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Precision Instrumentation design, inc. |
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Custom Automated Equipment Design and Manufacturing |
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A mandatory aspect of any business transaction is the determination of pricing. PID provides written quotations to its customers to allow them to plan and track their expenditures. Time and Materials Projects: In general, loosely defined projects that are expected to experience significant scope changes during the life of the project are quoted as time and materials. It is best if an agreement is made to define the project in phases so that a go/no-go determination may be made at meaningful milestones. Some example milestones are: · Feasibility or project budgetary estimate phase: PID assists in the development of a rough concept including a bill of materials and budgetary quotations from suppliers. Lead times and overall project completion costs are estimated at this time. High risk items are identified. At this time the cost estimate is based on a large number of assumptions; the actual project cost generally varies from 0.75 to 2 times the budgetary cost estimate. · Proof of concept phase: PID assists in the engineering of a proof of concept system. This is not a prototype and is usually comprised of subsystems designed to investigate the high risk items that have been identified. Additional learning in the proof of concept is used to refine the cost, lead time, and risk estimates. The actual project cost generally varies from 0.75 to 1.5 times the proof of concept estimate. · Prototype phase: PID assists in the design and integration of a prototype system. This system demonstrates the main functional components of the final product. Items such as enclosures and other cosmetic items are not addressed at this time unless they have a meaningful impact on the system function or project success. Significant learning regarding design tradeoffs, cost of goods, and lead times occurs during the prototype phase. Design details are generally locked in at the end of the prototype phase. The prototype is evaluated in light of the project goals and requirements, generally in a design review. · Alpha unit phase: PID assists in refining the prototype into an alpha unit. All items for the final system are designed and integrated into the alpha unit including cosmetic features and user interface elements. The alpha unit looks and behaves as much like the final product as possible. After testing and design updates to address any issues, the design is ready to be released to manufacturing. · Beta unit phase: PID provides support to the manufacturing team in the form of training as well as documentation updates to address issues found in the BOM or assembly instructions. The beta units are shippable or demo units. · Production phase: The customer takes over production of the product. PID provides assistance on an as-needed basis. Capital Equipment Design and Integration: · Capital equipment projects are normally quoted as fixed price projects. This requires a significant amount of planning to provide an accurate quotation. If the project is loosely defined and has a significant amount of unknown risk, the overall project cost can be significantly reduced by breaking the total project into several phases as described above. Time and materials phases will be used until the determination is made to lock the price estimate into a fixed quote to complete the project. |
Project Structure
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Labor Rate and Overall Project Cost: PID maintains an active knowledge of industry average burdened labor rates and uses these rates as a guide in pricing. However, as a project is estimated in terms of labor hours and materials, the total cost to complete a project can seem prohibitive to potential customers. Every customer must perform their own cost/benefit analysis and proceed in the manner that best meets their needs. The following list includes considerations that we believe should be considered in addition to the monetary cost of performing a project: · Time for project completion: The PID team has experience with equipment design and manufacturing and will be focused on the design project. Contrast this with adding the task of equipment design to the responsibilities of internal staff that are already fully utilized and may not have a comparable background in mechanical, software, and electronics development. Learning curves and task switching will increase the amount of time required for internal staff to complete the integration or equipment design project. · Progress toward core deliverables: The most effective deployment of internal staff, even engineering staff, is on deliverables that are aligned with the core competency of the company. It is easy to become distracted by developing tools to the detriment of product. In many cases development of such tools requires a significant amount of learning curve, characterization, and troubleshooting. These activities put drag on progress and can cause milestones to be missed. The PID team can work in parallel with internal staff, developing the tooling while freeing internal staff to focus on core deliverables. · Capital equipment accounting: The main cost in the development of most equipment is design and integration labor. The salaries for internal staff cannot be classified as a capital expenditure. Purchasing a piece of capital equipment from PID may allow the expense to be treated as a capital expenditure. This is not meant to be taken as tax advice; please verify this with your accountant or tax advisor. · Buy versus build: In some situations the idea of cobbling a machine together from used parts appears to be less costly than using new parts or buying an equivalent turn-key machine from a manufacturer. However, PID has experience that supports the following statement: When building a machine in-house, what you save in materials you will pay for in labor. If you try to build something that you could buy off the shelf you generally end up with reduced functionality without realizing significant savings. If you need something that has a unique feature set, building it makes sense. If you need something that is currently being manufactured, even if it seems to be very costly, it usually makes sense to buy it directly, perhaps using financing to assist with cash flow considerations. During the feasibility phase, PID will search for off the shelf solutions and recommend them to you if they exist and meet the project requirements. |
Pricing
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