Contract Machining Pricing: A Job-Shop Guide

A job shop lives or dies on its quotes. You do not own the product, you do not set the demand, and you rarely control the drawing — you sell capacity and skill against someone else's print, usually in competition with three or four other shops who got the same RFQ. Contract machining pricing is therefore a different discipline from pricing your own product: every euro of cost has to be recovered inside a number a buyer will actually accept, because there is no catalogue margin to hide behind and no second chance once you have committed to a price.

This guide is about pricing job-shop and subcontract work — the kind of machining, fabrication, and finishing that small-to-mid shops do for other companies. Not the part-level cost buildup (that is covered elsewhere), but the business reality of quoting work you do not own: which costs to recover, how to read an RFQ, when to walk away, and how to keep your price defensible when a buyer pushes back.

Why subcontract pricing is its own problem

When you quote contract work, three things are true at once that make it harder than pricing a finished product:

• The buyer compares you on price, fast. A purchasing agent who sends the same drawing to four shops usually awards the job to the first credible quote in budget. Slow or vague pricing loses work you would have won on cost.
• You absorb the cost of everything the drawing does not mention. Programming, fixturing, first-article inspection, certificates, packaging, and freight are all yours to recover — and a thin quote that forgot them turns a profitable job into a loss.
• You are exposed on the full job, not one part. A wrong unit price on a fifty-piece order is a fifty-times mistake. Repeat contracts multiply it further.

The shops that survive on contract work are not the cheapest. They are the ones whose quotes recover the whole cost of doing the job and can prove where the number came from when challenged.

The full cost of a contract job, not just the spindle

The most common way to lose money on subcontract work is to quote the machine time and treat everything else as free. Cycle time times machine rate is the easy part. The job costs more than that. A defensible contract quote recovers every block below:

Cost block	What it covers	Easy to forget?
Material	Stock + cutoff + certified-stock premium	No
Machine time	Cycle time × burdened machine rate	No
Setup	Fixturing, first-off, offsets — divided by batch	Sometimes
Programming / CAM	One-time NC programming for a new part	Yes
Tooling / fixtures	Special tools or soft jaws bought for this job	Yes
Inspection	First-article, in-process gauging, CMM report	Yes
Certs & docs	3.1 material cert, CoC, PPAP paperwork	Yes
Packaging & freight	Crating, pallets, outbound shipping	Yes
Overhead + margin	Everything else, plus your profit	No

The blocks marked "yes" are exactly the ones that vanish from a rushed quote and exactly the ones that make a contract job unprofitable. Programming and fixturing especially: they are real hours, they happen before you cut a single chip, and on a one-off they can exceed the machining cost entirely. For the mechanics of building each block up from the drawing, see how to price CNC machined parts and, for the spindle rate itself, machine shop hourly rate calculation.

A pricing formula you can actually defend

Build the quote bottom-up, then apply margin once at the end. The order matters because amortized costs depend on batch size:

1. Per-part variable cost = material + (cycle time × machine rate).
2. Per-job fixed cost = programming + special tooling + setup + first-article inspection.
3. Amortize fixed cost = per-job fixed cost ÷ batch quantity.
4. Per-part cost = per-part variable cost + amortized fixed cost + per-part overhead.
5. Per-part price = per-part cost ÷ (1 − target margin).

Worked example — a milled bracket, batch of 25:

• Material €6.00/part, cycle time 12 min at a €70/h burdened rate = €14.00/part variable → €20.00/part variable.
• Programming €120 + soft jaws €40 + setup €90 + first-article €30 = €280 fixed, ÷ 25 = €11.20/part.
• Overhead allocation €4.00/part.
• Per-part cost = 20.00 + 11.20 + 4.00 = €35.20.
• At a 35% target margin: 35.20 ÷ 0.65 = €54.15/part.

Note the divide-by-(1 − margin) in step 5. Marking cost up by 35% gives €47.52 and a real margin of only ~26%. The difference between margin and markup is one of the most expensive arithmetic mistakes in a job shop — margin vs markup in manufacturing pricing walks through why.

Batch size changes everything

Because the fixed block is divided across the order, the same part has a wildly different price at quantity 1 versus quantity 50. Quoting a prototype the same way as a production run loses you the prototype and undervalues your setup on small orders.

Batch	Fixed cost (€280) per part	Variable + OH	Cost/part	Price @ 35% margin
1	€280.00	€24.00	€304.00	€467.69
5	€56.00	€24.00	€80.00	€123.08
25	€11.20	€24.00	€35.20	€54.15
50	€5.60	€24.00	€29.60	€45.54

This is also your negotiating lever. When a buyer says your price is high, the honest answer is often "at this quantity, yes — give me the annual volume and the per-piece price drops." Quoting price breaks at 1 / 10 / 50 / 100 up front signals that you understand their volume and protects you on the small first order.

Reading the RFQ before you price it

Half of contract pricing is interpreting what the buyer actually asked for. The drawing carries hidden cost drivers, and the RFQ carries commercial traps. Before you put a number on it, confirm:

• Tolerances and surface finish. A single ±0.01 mm bore or a fine finish callout can add a finishing pass, gauging, and scrap risk. See GD&T and tolerances for estimators.
• Material and certification. Free-issue material vs you-supply changes the quote entirely; a 3.1 cert requirement changes your stock cost.
• Quantity and call-off schedule. A blanket order with monthly releases is priced differently from a one-time fifty-piece buy.
• Inspection and documentation. First-article, CMM reports, and PPAP are billable hours, not goodwill.
• Lead time and penalties. A short lead time may mean overtime or displacing other work; lead-time estimation should feed the quote, not be a guess bolted on after.

A clean, consistent process for handling incoming drawings keeps these from slipping through — see the RFQ workflow for small machine shops. And whether you call your output a quote, an estimate, or a bid matters legally and commercially: quote vs estimate vs bid.

When to walk away from the work

Not every RFQ is worth winning. Contract shops bleed slowly by accepting jobs that look like revenue but destroy capacity. Decline, or quote high deliberately, when:

• The price the buyer will pay is below your fully-loaded cost — winning it just funds your competitor's overhead.
• The job needs tooling or programming you cannot reuse and the volume will not amortize it.
• A tight tolerance or exotic material sits outside what your machines and people do reliably; scrap risk is a cost.
• The buyer is a known late-payer or a serial re-negotiator. Cash and aggravation are real.

Saying no to bad work is a pricing decision. The capacity you free up goes to jobs that actually pay, and consistency across the rest of your quotes — the kind that comes from a documented method rather than gut feel — is what protects you over a full year. Reducing quoting errors and improving accuracy covers how the same discipline that catches mistakes also tells you which jobs to refuse.

Quoting contract work straight from the drawing

The hard part of contract pricing is doing all of the above — reading the drawing, recovering every cost block, amortizing fixed cost across the batch, applying margin correctly — fast enough to beat three other shops, and consistently enough that the number holds up when the buyer pushes back. That is exactly what QuoteBuddy is built to do. You upload the customer's drawing (PDF, PNG, or JPG), the AI interprets the geometry — holes, threads, pockets, tolerances, material — and a deterministic cost engine applies your machine rates, your material costs, and your margin policy to produce a branded PDF quote. The AI reads the print; your rules set the price, so the number is repeatable and defensible.

Pricing in clear euros: a 30-day free trial, then a Free plan (3 quotes/month), Starter at €149, Professional at €399, and Business at €799 — full details on the pricing page. Start the free trial, quote three drawings you have already won or lost on price, and compare the result against what you actually billed. If the numbers hold, you have removed your biggest bottleneck on contract work.