Skip to main content

Comparing Quotes for Custom Equipment: Normalizing Scope and Risk

Two quotes for the same custom machine can differ by a wide margin in price and still describe different machines, different scopes of work, and different shares of risk for the buyer. UTEC Industrial designs, engineers, machines, fabricates, and installs custom material handling systems for aerospace and heavy industry from its Spokane Valley, WA facility, integrating Allen-Bradley PLC and motion control with in-house CNC machining, heat treating, and stress relief. This article explains how a project engineer or engineering procurement team normalizes quotes for engineered handling equipment before comparing them: a common scope baseline, a comparison matrix, checks on line-item prices, the risk carried by the contract type, and the acceptance and warranty terms. The public model used throughout is the source-selection practice of US federal buyers, and each quote has to be read along the whole build chain, design → engineering → parts machining → fabrication → assembly → weld fatigue → stress relief → drives → controls → tuning → monitoring.

Why can't quotes for custom equipment be compared on price alone?​

One detailed public rulebook for comparing proposals is Part 15 of the Federal Acquisition Regulation (FAR), the part that prescribes policies and procedures governing competitive and noncompetitive negotiated acquisitions for US federal agencies. It states that in different types of acquisitions, the relative importance of cost or price may vary. The FAR is cited here as codified in 48 CFR, using the eCFR text current as of September 28, 2026. The FAR is being rewritten under an overhaul led by the Office of Federal Procurement Policy and the FAR Council (the RFO), which its landing page says will "rewrite it in plain language, and remove most non-statutory rules", and provision numbers may change.

FAR 2.101 defines best value as the expected outcome of an acquisition that, in the Government's estimation, provides the greatest overall benefit in response to the requirement. FAR 15.101 says that where the requirement is clearly definable and the risk of unsuccessful contract performance is minimal, cost or price may play a dominant role in source selection. It adds that the less definitive the requirement, the more development work required, or the greater the performance risk, the more technical or past performance considerations may play a dominant role.

These are rules for government buyers, not for private plants. As engineering reasoning, a one-off coil car for an aluminum mill or a positioner for an airframe assembly sits toward the less-definitive end of that range: it needs development work, and its performance risk is not minimal. A low price on such a machine is a question to answer, not an answer (48 CFR 2.101, 2001, Best value; 48 CFR Part 15, 2024, 15.101; Office of Federal Procurement Policy and FAR Council, RFO deviation guidance, 2026).

When is the lowest technically acceptable quote the right choice?​

FAR 15.101 is headed "Best value continuum", and its two subsections describe a tradeoff process and a lowest price technically acceptable process. A tradeoff process, under FAR 15.101-1, "is appropriate when it may be in the best interest of the Government to consider award to other than the lowest priced offeror or other than the highest technically rated offeror", and the perceived benefits of a higher-priced proposal "shall merit the additional cost". The lowest price technically acceptable (LPTA) process, under 15.101-2, is appropriate when best value is expected to result from selecting the technically acceptable proposal with the lowest evaluated price, and tradeoffs are not permitted. Except for DoD, 15.101-2(c) says LPTA "shall only be used when" six listed conditions are met. One of them is that the agency has determined that the lowest price reflects the total cost, including operation and support, of the product or service being acquired.

The Department of Defense Source Selection Procedures (2022) state that LPTA is appropriate where three things hold: requirements are well defined, risk of unsuccessful contract performance is minimal, and there is no value, need, or willingness to pay for higher performance. GAO-19-54 estimated that about 26 percent of DoD contracts and orders valued at $5 million and above in fiscal year 2017 were competitively awarded using LPTA, which DoD used to buy such things as equipment, fuel, information technology services and construction services. In the 14 contracts and orders GAO reviewed, the Section 813 criterion that the lowest price reflects full life-cycle costs, including for operations and support, was generally not considered, and 8 of the 14 contracting officials said that criterion was not applicable to their acquisitions. GAO notes that findings from those 14 cannot be generalized to all contracts and orders that used LPTA.

As engineering reasoning, the life-cycle condition is a hard one for a heavy handling machine to meet: two quotes can meet the same specification and still differ in drive energy, wear-part life, and maintenance access. The total cost of ownership article gives the method for putting those costs on one number (48 CFR Part 15, 2024, 15.101-1 and 15.101-2; U.S. Department of Defense, Source Selection Procedures, 2022, §1.3; GAO-19-54, 2018, Highlights and p. 4).

How should a buyer set a scope baseline before quotes arrive?​

As engineering reasoning, a quote can only be as definite as the scope it answers. Two capital-project bodies publish documents on that link, and both are cited here only at the level of their publishers' pages and sample text. The Construction Industry Institute's PDRI for industrial projects, Version 5.0 (IR113-2, 2019), is described by CII as providing "a method for measuring project scope development", with uses that include "A scope definition checklist" and "An industry standard for rating the completeness of project scope definition". CII tags it for light industrial, heavy industrial, buildings and infrastructure projects; it is a capital-project tool, not a machinery-procurement tool, and applying it to a custom machine is engineering reasoning.

AACE International Recommended Practice 17R-97 (2020) is, in its own words, "intended to provide a guideline, not a standard". It uses the maturity level of project definition deliverables as the primary characteristic to categorize estimate classes, and it says the various parties that use project cost estimates often misinterpret the quality and value of the information available to prepare cost estimates, the various methods employed during the estimating process, the accuracy level expected from estimates, and the level of risk associated with estimates. Its estimate classes and accuracy ranges are not quoted here.

As engineering reasoning, the same point applies to a custom machine: a bid against a loosely defined scope can carry an allowance for what the bidder had to assume, and bids that assume different things cannot be compared line by line. A written user requirement specification that states the load, duty cycle, envelope, interfaces, and acceptance tests, issued to every bidder in the same revision, gives the bids one basis; the URS article covers how to write it (Construction Industry Institute, PDRI, IR113-2, 2019; AACE International Recommended Practice No. 17R-97, 2020, §1).

Which scope items should a quote-comparison matrix normalize?​

FAR 2.101 defines a line item as the basic structural element in a procurement instrument that describes and organizes the required product or service for pricing, delivery, inspection, acceptance, invoicing, and payment; as engineering reasoning, that is the unit a comparison matrix needs. The DoD Source Selection Procedures say a tradeoff source selection can be simplified when only the requirements reflected in criteria critical to the user are evaluated subjectively, and all other critical requirements are evaluated on an acceptable or unacceptable basis, for example through a compliance matrix or other go/no-go criteria.

As UTEC engineering practice, the comparison matrix lists every scope item down one side and every bidder across the top, and each cell records one of three answers: included, excluded, or priced as an option. The rows for a custom handling machine include:

  • design and engineering, including design calculations, design reviews, and the drawing package to ASME Y14.100-2017 or the owner's drawing standard;
  • machining of wheels, axles, pins, bearing seats, and mounting faces, with the tolerances stated;
  • fabrication, weld inspection, and stress relief of the welded structure before final machining;
  • drives, gearboxes, brakes, and the motor and drive sizing basis;
  • controls hardware, PLC and HMI programming, the safety functions, and native program files;
  • factory acceptance testing, with the number of test days and who witnesses them;
  • crating, freight, rigging, and site installation;
  • site commissioning, tuning, site acceptance testing, and operator and maintenance training;
  • manuals, recommended spares, and warranty terms.

In that practice, each blank cell is either an exclusion or a question for the bidder, and the matrix shows both before price is discussed. The URS article's deliverables list gives the documentation rows in full (48 CFR 2.101, 2001, Line item; U.S. Department of Defense, Source Selection Procedures, 2022, §1.3.1.2; ASME Y14.100-2017).

How should exclusions, assumptions, and gaps in a quote be handled?​

The DoD Source Selection Procedures define three terms that fit what a comparison finds. A deficiency is "a material failure of a proposal to meet a Government requirement or a combination of significant weaknesses in a proposal that increases the risk of unsuccessful contract performance to an unacceptable level". A weakness is "a flaw in the proposal that increases the risk of unsuccessful contract performance". An uncertainty is "any aspect of a non-cost/price factor proposal for which the intent of the offer is unclear", for example more than one way to interpret the offer.

The FAR limits what exchanges with a bidder may do. In an award without discussions, under 15.306(a)(2), offerors may be given the opportunity to clarify certain aspects of proposals or to resolve minor or clerical errors. Communications held before a competitive range is established may, under 15.306(b)(2), be conducted to enhance Government understanding of proposals, but they "shall not be used to cure proposal deficiencies or material omissions, materially alter the technical or cost elements of the proposal, and/or otherwise revise the proposal". Those limits are written for federal buyers. As engineering reasoning, the distinction between clarifying an offer and changing it is still useful to a private buyer comparing quotes.

As UTEC engineering practice, a buyer normalizes a quote by pricing each exclusion as an adder at the buyer's own estimate and entering each stated assumption in the matrix beside the price. Examples of adders on a transfer car for a steel mill are rail and foundations, field wiring from the plant's power source, and an interlock to an existing crane. The DoD procedures add that beneficial aspects of a proposal that earned evaluation credit should be incorporated into the contract, and that in general the contractor's entire proposal should not be (U.S. Department of Defense, Source Selection Procedures, 2022, §3.12 and Definitions; 48 CFR Part 15, 2024, 15.306).

How can line-item prices reveal risk in a quote?​

Price analysis, under FAR 15.404-1(b)(1), is the process of examining and evaluating a proposed price without evaluating its separate cost elements and proposed profit. The price analysis techniques listed in 15.404-1(b)(2) include "rough yardsticks (such as dollars per pound or per horsepower, or other units) to highlight significant inconsistencies that warrant additional pricing inquiry", and "Comparison of proposed prices with independent Government cost estimates". As engineering reasoning, a buyer's own estimate for a positioner or a conveyor section plays the same role, and a price per pound of fabricated structure that differs sharply between bidders shows where to ask questions.

The FAR also warns about the pattern of prices across line items. Under 15.404-1(g)(1), unbalanced pricing "may increase performance risk and could result in payment of unreasonably high prices". Unbalanced pricing exists when, despite an acceptable total evaluated price, the price of one or more line items is significantly over or understated as indicated by the application of cost or price analysis techniques. The greatest risks, the FAR says, occur in three listed cases, the first being when startup work, mobilization, first articles, or first article testing are separate line items. As engineering reasoning, a custom machine quote that lists mobilization or first article testing as separate line items matches that first case, and those lines, along with any separately priced up-front engineering, are the ones to check against the buyer's own estimate.

Cost realism is a further check. Under 15.404-1(d)(3), cost realism analyses may also be used on competitive fixed-price incentive contracts or, in exceptional cases, on other competitive fixed-price-type contracts when new requirements may not be fully understood by competing offerors, there are quality concerns, or past experience indicates that contractors' proposed costs have resulted in quality or service shortfalls. The results may be used in performance risk assessments and responsibility determinations, but proposals shall be evaluated using the criteria in the solicitation, and the offered prices shall not be adjusted as a result of the analysis (48 CFR Part 15, 2024, 15.404-1 paragraphs b, d and g).

How does the contract type change the risk a quote carries?​

The FAR links the choice of contract type to contractor risk. Under 16.103, selecting the contract type is generally a matter for negotiation and requires the exercise of sound judgment, and the objective is to negotiate a contract type and price that will result in reasonable contractor risk and provide the contractor with the greatest incentive for efficient and economical performance. A firm-fixed-price contract, it says, shall be used when the risk involved is minimal or can be predicted with an acceptable degree of certainty. Under 16.202-1, a firm-fixed-price contract places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss. Under 16.202-2, it is suitable for acquiring commercial products or commercial services, or for acquiring other supplies or services on the basis of reasonably definite functional or detailed specifications, when the contracting officer can establish fair and reasonable prices at the outset.

Among the factors in 16.104, the FAR says that complex requirements, particularly those unique to the Government, usually result in greater risk assumption by the Government, and that this is especially true for complex research and development contracts, when performance uncertainties or the likelihood of changes makes it difficult to estimate performance costs in advance. As a requirement recurs or as quantity production begins, the cost risk should shift to the contractor, and a fixed-price contract should be considered. Under 16.301-2, the contracting officer shall use cost-reimbursement contracts only when circumstances do not allow the agency to define its requirements sufficiently to allow for a fixed-price type contract, or when uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract.

As engineering reasoning, a firm fixed price on a first-of-a-kind machine asks the builder to carry risk it cannot yet estimate, and the quote can carry a contingency for it. Two ways to reduce that contingency are a paid design phase that firms up the scope before the build is priced, and stated unit prices for known unknowns, such as foundation work or extra test days (48 CFR Part 16, 2021, 16.103, 16.104, 16.202-1, 16.202-2 and 16.301-2).

How should technical risk be rated alongside price?​

The DoD Source Selection Procedures define technical risk as the degree to which the offeror's proposed technical approach for the requirements of the solicitation may cause disruption of schedule, increased costs, degradation of performance, the need for increased Government oversight, or increased likelihood of unsuccessful contract performance. Table 2B rates that risk as Low, Moderate, High, or Unacceptable, and it notes that for firm-fixed-price contracts the reference to increased cost may be removed from the risk rating descriptions. FAR 15.305(a) requires the relative strengths, deficiencies, significant weaknesses, and risks supporting proposal evaluation to be documented in the contract file.

The same procedures describe a way to price performance above the minimum. Under the value adjusted total evaluated price (VATEP) technique, the value placed on better performance is identified and quantified in the request for proposals, and the source selection team can assign a monetary value, or "monetize", the higher-rated technical attributes. As engineering reasoning, a buyer can do the same for a handling machine by stating in the request for quotation what a shorter cycle time or a higher positioning accuracy is worth per unit.

As engineering reasoning, the risk items worth rating on a heavy handling machine include:

  • long-lead drives, gearboxes, and bearings, and who carries the delivery risk;
  • whether the welded structure is stress-relieved before final machining, and by whom;
  • the controls platform the plant already supports, against a new one;
  • the builder's plan for proving the machine before it ships.

Those ratings sit next to price in the comparison, not after it (U.S. Department of Defense, Source Selection Procedures, 2022, §1.3.1.4, §2.3.2.6 and Table 2B; 48 CFR Part 15, 2024, 15.305).

How should acceptance testing, first articles, and warranty be compared?​

Acceptance, warranty, and risk of loss are terms that can make two equal prices unequal. Under FAR 46.501, acceptance constitutes acknowledgment that the supplies or services conform with applicable contract quality and quantity requirements, except as provided in that subpart and subject to other terms and conditions of the contract, and it may take place before delivery, at delivery, or after delivery. FAR 46.503 says each contract shall specify the place of acceptance. Under 46.505(b), unless the contract specifically provides otherwise, risk of loss stays with the contractor until delivery to a carrier when transportation is f.o.b. origin, or until acceptance or delivery at the destination, whichever is later, when it is f.o.b. destination. That rule does not apply to supplies that so fail to conform to contract requirements as to give a right of rejection.

FAR 46.703 says the use of warranties is not mandatory, and its cost factors include the contractor's charge for accepting the deferred liability created by the warranty. Under 46.706(b)(3), the warranty's duration must be clearly specified and is set after considering such factors as the estimated useful life of the item, the nature of the item including storage or shelf-life, and trade practice. For witnessed testing, the federal clause FAR 52.209-3 has the contractor notify the contracting officer in writing of the time and location of first article tests so that the Government may witness them. If the first article is disapproved, the contractor repeats tests on Government request, and all costs of those tests, including additional tests after a disapproval, are borne by the contractor.

IEC 62381:2024 defines requirements and checklists for the factory acceptance test (FAT), factory integration test (FIT), site acceptance test (SAT) and site integration test (SIT) of automation systems in the process industry. Its publisher describes it as providing a means for all parties, including the owner, the buyer and the vendor, to agree the scope of activities and responsibilities involved in performing these tests, in order to achieve a timely delivery and acceptance of the automation system. The URS article and the project lifecycle article cover what each test proves. As engineering reasoning, the rows to normalize for quote comparison are the FAT and SAT days, who pays for a retest, where acceptance happens, and when the warranty period starts. UTEC Industrial performs factory acceptance testing and on-site commissioning (48 CFR Part 46, 2021, 46.501, 46.503, 46.505, 46.703 and 46.706; FAR 52.209-3, 1989; IEC 62381:2024).

How should the controls and sensing scope be compared across quotes?​

As engineering reasoning, the intelligence layer is one place where quotes can differ without it showing on the price page, because a line such as "PLC controls" can describe very different systems. As UTEC engineering practice, the controls rows of the comparison matrix ask each bidder to state:

  • the controller family, I/O count with spare capacity, network, and HMI;
  • the sensing package, such as absolute encoders, load cells, limit and position switches, and temperature sensors near hot loads;
  • VFD or servo drives for each axis, and who tunes them under load at site;
  • the risk assessment, the list of safety functions, and the required performance level of each;
  • zone interlocks to plant equipment such as cranes, furnace doors, and adjacent conveyors;
  • delivery of the PLC and HMI programs in native, editable form, with drive parameter files;
  • the condition monitoring included, such as motor current, fault logs, and brake-cycle counts.

Three standards give the rows a common reference, cited here at the level of scope. IEC 60204-1:2016 applies to electrical, electronic and programmable electronic equipment and systems to machines not portable by hand while working. ISO 12100:2010 specifies principles of risk assessment and risk reduction to help designers achieve safety in the design of machinery. ISO 13849-1:2023 specifies a methodology and provides related requirements, recommendations and guidance for the design and integration of safety-related parts of control systems (SRP/CS) that perform safety functions; it applies to SRP/CS for high demand and continuous modes of operation and does not apply to low demand mode of operation.

As engineering reasoning, a quote that names a controller family the plant does not already support adds training, spares, and future migration cost that belong in the comparison, and a quote that leaves the safety functions to be defined later leaves part of the controls price open (IEC 60204-1:2016; ISO 12100:2010; ISO 13849-1:2023).

Where along the build chain should two quotes be compared?​

As engineering reasoning, two quotes for the same machine can diverge at every link of the chain, and a comparison that stops at the equipment list can miss those differences:

  • Design and engineering: the stated design life, duty class, and load cases.
  • Parts machining: the tolerances on bores, fits, and datum faces, and how they are inspected.
  • Fabrication and weld fatigue: the joint details checked against the load cycles the URS states, and the weld inspection method.
  • Stress relief: whether the weldment is stress-relieved before final machining, and the method.
  • Assembly: alignment records for wheels, rails, gearboxes, and couplings.
  • Drives, controls, and tuning: the sizing basis, the platform, and commissioning under load.
  • Monitoring: which signals are trended once the machine is in service.

MHI's Planning Principle calls for the needs, performance objectives, and functional specification of the proposed method to be completely defined at the outset, and it says success in planning large-scale material handling projects generally requires a team approach involving suppliers, consultants when appropriate, and end-user specialists. In NASA's own program practice, the NASA Systems Engineering Handbook says that for contracted purchases the technical team should work with the contracting officer and take part in the review of the technical information and in "the selection of the vendor that best meets the design requirements for acceptable cost and schedule". UTEC Industrial stress-relieves welded structures, including by automated vibratory stress relief, and machines to tolerances of ±0.001 in, two links a buyer can ask every bidder to state (Material Handling Institute, Ten Principles, Principle 1; NASA/SP-2016-6105 Rev2, §5.1.1.2.2).

Related Articles

References​

  • 48 CFR 2.101: Definitions. GSA, DoD and NASA (FAR), as amended 2001.
  • 48 CFR Part 15: Contracting by Negotiation. GSA, DoD and NASA (FAR), as amended 2024.
  • Office of Federal Procurement Policy and FAR Council. Revolutionary FAR Overhaul: FAR Part Deviation Guidance. Acquisition.GOV, 2026 (web documentation, accessed September 2026).
  • U.S. Department of Defense. Department of Defense Source Selection Procedures. OUSD(A&S) Defense Pricing and Contracting, 2022.
  • U.S. Government Accountability Office. Defense Contracting: DOD Should Clarify Criteria for Using Lowest Price Technically Acceptable Process (GAO-19-54). GAO, 2018.
  • Construction Industry Institute. PDRI: Project Definition Rating Index -- Industrial Projects, Version 5.0 (IR113-2). CII, 2019.
  • AACE International Recommended Practice No. 17R-97: Cost Estimate Classification System. AACE International, 2020.
  • ASME Y14.100-2017: Engineering Drawing Practices. ASME, 2017.
  • 48 CFR Part 16: Types of Contracts. GSA, DoD and NASA (FAR), as amended 2021.
  • 48 CFR Part 46: Quality Assurance. GSA, DoD and NASA (FAR), as amended 2021.
  • FAR 52.209-3 (SEP 1989): First Article Approval—Contractor Testing. U.S. General Services Administration, 1989.
  • IEC 62381:2024: Automation systems in the process industry — FAT, SAT, FIT and SIT. IEC, 2024 (Ed.3).
  • IEC 60204-1:2016 (Ed. 6.0): Safety of Machinery -- Electrical Equipment of Machines -- Part 1: General Requirements. International Electrotechnical Commission, 2016.
  • ISO 12100:2010: Safety of machinery — General principles for design — Risk assessment and risk reduction. ISO, 2010.
  • ISO 13849-1:2023: Safety of machinery — Safety-related parts of control systems — Part 1: General principles for design. International Organization for Standardization, 2023.
  • Material Handling Institute. The Ten Principles of Material Handling. MHI, 2026 (undated web documentation, accessed September 2026).
  • NASA. NASA Systems Engineering Handbook, NASA/SP-2016-6105 Rev2. National Aeronautics and Space Administration, 2016.

Ready to Discuss a Material Handling System?​

UTEC Industrial designs, engineers, machines, fabricates, and installs custom material handling systems for heavy industry, from the stress-relieved structure and drives to the Allen-Bradley PLC controls, tuning, and monitoring that run them, at its Spokane Valley, WA facility. Send UTEC the application, loads, and duty cycle to start a system review.

Request a Quote →

Questions? Call (509) 922-1832 or email sales@utec.co

Last updated on