How Are Steel Fabrication Jobs Priced?Central Mobile Welding
When getting quotes from multiple fabricators, sometimes they all fall around a similar price point, while other times there is little consistency from one to the other. This can happen for a variety of reasons. In this article, we’ll go over the different factors that affect pricing.
The General Formula for Pricing Metal Fabrication Jobs
Businesses often develop their strategies for pricing jobs based on what has been successful for them in the past.
For the most part, they all follow some derivative of the following formula:
Price= (estimated # hours of work) x (hourly rate)
As you can see, variations in pricing can develop from how businesses estimate the time to complete a given job, along with their hourly rate.
Does the Fabricator Regularly Take on this Type of Project?
Fabricators that venture into new territory and have little experience in pricing a particular job may end up being way off the mark in their estimation of how long they think it will take. This can go either way, with them vastly underquoting or overquoting a project.
Size of Company and Work Ethic
We have found from bidding against other competitors in metal fabrication that the larger the company, the higher their quotes tend to be. There is often no one more motivated to work quickly to reduce a customer’s cost than the company’s owner. As more and more workers join the company, it becomes increasingly difficult for the owner or management to regulate the efficiency of their workers. In turn, this leads to a more considerable amount of hours being required for the company to complete a given project.
How Liability Affects Pricing
Some projects come with increased risk as soon as they leave the fabricator’s shop. If there is a higher possibility of someone getting hurt from a defect in the product, companies will often have to incorporate higher insurance costs into their pricing. Also, fabricators have to account for work that is more prone to employee error. Some types of steel fabrication tend to require more accuracy, or the welding may need to exhibit excellent corrosion resistance, as is common with stainless steel welding. Some businesses are likely better at dealing with these work sensitivities than others, which will invariably lead to those companies finishing such projects quicker and at a lower cost.
The Dark Side of Quoting
Unfortunately, it is common for metal fabricators to quote higher for clients of larger businesses that are expected to have more money. This is especially the case when the government is the client. Many companies will quote based on what they think they can get rather than their costs in these circumstances. We do not believe in this practice at Central Mobile Welding. Our philosophy is simple: we are after a client, not a job. By intentionally overquoting, a business may make substantially more on a project, but they will likely lose that client down the road to someone who bids appropriately. By focusing on making company operations as efficient as possible, consistently providing lower pricing for customers is the best way to grow a client base and expand the company.
Final Thoughts on How Steel Fabrication Jobs Are Priced
Overall, smaller companies that are more acquainted with a particular type of work tend to price jobs lower than other steel fabricators. For clients looking to get the best pricing, we’d advise them to seek out a smaller company with a lot of experience in the type of project they need to complete. For other steel fabricators looking to develop a pricing model, we’d recommend establishing a competitive hourly rate and then looking for projects that match up with their experience.
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