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The Price on the Quotation May Not Be the Full Cost

Thirteen costs that rarely appear on a machine quotation, even though you will pay them.
What should you ask about each one before you sign?

When a supplier sends me a quotation for a new machine, I don’t look at the price first. I look at what the price leaves out.

A machine quotation answers one question: what will the supplier charge for the machine? The importer needs the answer to a different question: what will it cost us to have this line running in our building and making good product? Most budgets break in the gap between those two numbers.

The missing costs fall into four stages, and each one has a question to ask the supplier.

Stage 1: Before the machine leaves Europe

  1. What the price includes (Incoterms)A price “EXW” (ex works) means the machine is ready at the supplier’s door, and everything after that is yours. A price “CIF” includes sea freight and insurance to your port. You cannot compare two quotations on different terms until you bring them to the same point.Ask: Which Incoterm is this price based on, and what is the price on the term we need?
  2. Packing and export documentsSea freight needs special packing that protects the machine from moisture and salt for weeks at sea. Sometimes it is in the price, sometimes it is a separate line, and sometimes it is not mentioned at all.Ask: Is seaworthy export packing included? Who prepares the export documents?
  3. Factory acceptance test (FAT)Testing the machine at the supplier’s factory before it ships is the best moment to find a problem. Many suppliers include a standard test. A test with your own product or materials, or extra test days, is usually charged separately.Ask: What does the included FAT cover, and what does it cost to test with our product?

Stage 2: Getting it into your building

  1. Freight, customs and the last few kilometresPort fees, customs duties and taxes in your country, the truck from the port, and the crane or team that moves a machine of several tonnes through your door. None of this will appear on a European quotation.Ask: What are the dimensions and weight, packed and unpacked? Then check your doors, your access route, and what your floor can carry.
  2. UtilitiesThis is the cost that is easiest to underestimate. The machine needs electricity at a set voltage and frequency, compressed air, and sometimes purified water, clean steam, nitrogen, or a cleanroom of a certain grade around it. If the building is not ready, the machine waits, and the supplier’s technicians wait with it.Ask: Send us the full utility list with consumption figures, and the voltage and frequency required.

Stage 3: Making it work

  1. Installation and start-upSupplier technicians are charged by the day, plus travel, hotel and sometimes visa costs. If they arrive and your site is not ready, you usually pay for the waiting days too.Ask: How many technician days are included, what is the day rate after that, and who pays if the start is delayed?
  2. Qualification: the documents, and who does the workAfter the machine is installed, it must be qualified: IQ checks that it was installed correctly, and OQ checks that it works as specified. Two costs hide here. The first is the documents: material certificates, drawings, and ready-written IQ/OQ protocols for this machine. Some suppliers include them, others charge for them. The second is the work itself. The supplier’s engineer can carry out IQ/OQ during the installation visit, but this is usually priced as an extra service. If your own team does it, plan the time and the people.Ask: Are the IQ/OQ protocols included, and in which language? Can your engineer carry them out on site, and at what cost?
  3. Change parts and formatsA machine quoted for one bottle size, one tablet shape or one vial size will need extra parts for every other product you plan to run on it.Ask: Which formats are included, and what does each extra format cost?
  4. Software and data integrityAudit trail, user access levels and electronic records are sometimes options, not standard. For a plant that will be inspected, they are not optional.Ask: Does the control system, as quoted, meet EU GMP Annex 11, or is that an extra?
  5. TrainingTraining operators and maintenance staff, at your site or at the supplier’s factory, costs money and days.Ask: How many training days are included, for how many people, and does it cover maintenance staff?

Stage 4: Keeping it running

  1. Spare parts for the first two yearsGaskets, seals and other parts that wear out. When your plant is far from Europe, one missing gasket can stop the line for weeks.Ask: Send the recommended spare parts list for two years, with prices and delivery times.
  2. Consumables and serviceFilters, single-use bags, tooling that wears out, and the yearly service visit. These are paid every year, not once.Ask: What is the expected yearly running cost of this machine?
  3. Payment and currencyBank charges, and the exchange rate between the day you order and the day you pay the last instalment. The longer the delivery time, the longer you carry that risk.Ask: What is the payment schedule, in which currency, and is the price fixed until delivery?

How I compare two quotations

I put both quotations into one table with the same rows: the machine price and the thirteen items above. Every empty cell becomes a question to the supplier. I don’t compare the two final numbers until every line in the table has a number, because a total with empty lines is not a real total. Very often, the cheaper machine turns out not to be the cheaper line.

None of this means the supplier is hiding something. A machine builder quotes what it builds. Seeing the rest is the buyer’s job.

If you have quotations on your desk that don’t line up, send them to me. I will tell you what each one is missing, and what to ask before you sign.