# Why Custom Machine Projects Lose Margin After the Quote Is Won > Source: https://netray.co/resources/why-custom-machine-projects-lose-margin-after-the-quote > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Knowledge Base ## Short answer The common reasons ETO machine builders win the quote but lose the margin: engineering overruns, unpriced changes, rework, warranty, and how to measure each. ## Category erp-general ## Content **Intro:** Custom machine projects lose margin after the quote mainly through engineering overruns, unpriced customer changes, rework from late design errors, purchased-part price and lead-time changes, extended FAT and commissioning, and warranty. Few of these show up in a standard ERP margin report, which compares revenue to material and shop labor. To fix margin, measure each leak by project and by cause, then feed the pattern back into the next quote. **Sections:** #### Engineering Overruns **Body:** Design and controls hours are the most common overrun and the least visible, because engineers are salaried and time entry is weak. A project quoted at 800 engineering hours that consumes 1,200 loses about 400 hours at fully loaded cost, which can erase the entire profit on a mid-size machine. Track hours by discipline against the quote at design freeze and again at FAT. Overruns on first-of-a-kind modules should be expected and priced, either by contingency or by a separate paid concept phase. **Bullets:** - Compare actual to quoted hours by discipline - Review at design freeze, not at shipment - Price new design modules with explicit contingency #### Unpriced Changes and Customer Delays **Body:** Verbal requests and late customer inputs, such as delayed sample parts or approvals, keep engineers and test floor space tied up. Each delay has a cost even if the contract date does not move. Record customer-caused delays and absorbed changes with an hour estimate. After a few projects, you will see which customers and which kinds of requests cost the most, and you can price that into quotes or enforce your change order process more strictly. #### Rework and Late Design Errors **Body:** An interference found during assembly, a wrong sensor mount, or a wiring error found at checkout costs far more than the same error caught in design review. Track rework hours and scrap explicitly with a cost code instead of burying them in assembly labor. A simple rework code in the ERP, with a cause note, gives you a Pareto after ten projects. Design reviews with assembly and controls staff present before release are the cheapest margin protection available. #### Purchased Parts, Freight, and Commissioning **Body:** Purchased components often make up half or more of the machine cost. Price increases between quote and purchase, expedite fees, and substitutions due to lead times are real margin leaks, especially for drives, robots, and PLCs. Compare PO price to quoted price per line as POs are placed. On the service side, travel, extended site acceptance, and warranty callbacks are often not quoted properly. Record them against the project so the next quote includes a realistic installation and warranty reserve. #### Making It Measurable **Body:** Define a margin bridge for each closed project: quoted margin, then deductions for engineering overrun, rework, purchased cost variance, unbilled changes, commissioning, and warranty, ending in actual margin. A spreadsheet fed from ERP actuals can do this. A private AI layer over the ERP can build the bridge on request across all closed projects and explain the largest drivers, with the underlying queries visible. If your margins are healthy and consistent, spend your time elsewhere. **Cta:** Netray can build the quoted-to-actual margin bridge across your closed projects directly from ERP data, read-only and on infrastructure you control. **Faq:** #### Why do machine builders lose money on projects they won? **Answer:** Typically from underestimated engineering hours, unpriced customer changes, rework, purchased cost increases, and extended commissioning or warranty costs. Because ERP margin reports often omit engineering time, the loss appears late or is hidden in overhead. #### What is a good gross margin for a custom machine builder? **Answer:** It varies by market and complexity, but many builders target a gross margin in a broad range and measure project-level variance more carefully than the average. The more useful metric is the gap between quoted and actual margin by project. #### How do you track quoted vs actual margin on ETO projects? **Answer:** Load the quote budget by line into the project at award, capture actual cost including engineering time, and compare at milestones and at close. Document the variance reasons so they feed correction factors in the next estimate. ## Related Slugs - gross-margin-analysis-manufacturing - syteline-costing-variance-investigation - warranty-management-manufacturing-guide - syteline-project-profitability-reporting - engineer-to-order-erp-challenges ## Search terms why machine builders lose margin, ETO project margin erosion, quoted vs actual margin custom machinery, custom equipment profitability, engineering overrun custom machine, margin leakage engineer to order --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json