Guide
How do you set a design to cost target for a new machined part?
Design to cost is a design method in which a target unit cost for a part is set before detailed design starts and treated as a requirement alongside function, quality and schedule, so the geometry, material, tolerances and process are chosen to meet that cost instead of being checked against it after the first quote. For a new machined part, it means deriving the target from what the product can afford, stating the quantity and delivery basis behind it, and getting supplier cost feedback while the drawing can still change.
By Saola Manufacturing engineering team · Published · Updated
The problem usually shows up at the worst moment. The drawing is released, the prototype worked, the program has a cost budget, and the first production quote comes back well above it. Purchasing is asked to negotiate the gap, but most of that gap was written into the drawing months earlier, in the material, the setups, the tolerance block and the finish. The idea of managing this on purpose is old: the US Department of Defense once wrote it into a standard, MIL-STD-337, Design to Cost, which set program objectives and requirements for design to cost on military systems and equipment, with guidance in MIL-HDBK-766. Both documents are canceled, but the method lives on in commercial target costing. This guide is written for the design engineer and the buyer who share one new machined part and one number: how to set the target, which decisions lock the cost, how to get honest supplier feedback before release, and what to put on the drawing and RFQ so the target survives quoting.
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How do you know a new machined part is going to miss its cost target?
The clearest sign is a first quote that lands above target after the drawing is already released. The pattern of several quotes tells you why: quotes that cluster together above target point to the design, while quotes that scatter widely point to an ambiguous drawing.
When three or four capable suppliers quote close to one another and all of them miss, the cost is real. It sits in the geometry, the material or the requirements, and no amount of negotiation will remove it, because each supplier is pricing the same machining hours and the same inspection effort. When the same suppliers spread far apart, the drawing is being read in different ways. One shop has assumed a tolerance applies everywhere, another has assumed a cosmetic finish, a third has priced a full inspection report on every lot. That spread is a drawing problem to fix before anyone negotiates price.
Earlier warning signs are easy to miss. Nobody can say what the part is allowed to cost, or the number that exists came from the price of a different part. The target is quoted as a single figure with no quantity behind it. The prototype price is used as the benchmark, although a prototype at a handful of pieces carries setup and programming that a production lot spreads out. And the first time anyone outside engineering sees the model is the day it is sent out for a formal quote. If any of these is true, the part has no design to cost target yet, only a hope.
Why do new machined parts miss their cost target?
Most misses come from a target that was set late or without a basis, followed by drawing choices that were never priced: copied tolerance blocks, extra setups, an awkward material and finishes or inspection that nobody counted.
Ranked roughly by how often they decide the outcome on a new machined part:
- No written target, or one without a basis. A target with no quantity, no delivery point, no finish and no currency cannot be compared with any quote. The GAO Cost Estimating and Assessment Guide treats ground rules and assumptions as a required step of any credible estimate for the same reason.
- Quantity mismatch. Setup, programming, fixturing and first-article work are largely fixed per order, so the same part is priced very differently at a prototype quantity and at a production release. A target set at one quantity and quoted at another is missed by arithmetic.
- Tolerances and finishes copied from a template. A tight general tolerance in the title block applies to every untoleranced dimension, and a tight surface finish note applies to every surface. Using the medium class of ISO 2768-1 as the default and tolerancing only the functional features is the usual cure; the guide to too-tight tolerances shows where that cost goes.
- Geometry that forces extra setups or special tools. Features on many faces, deep narrow pockets, small inside corner radii and odd hole sizes add fixtures, tool changes and time; the design for machining checklist covers each one.
- Material chosen by habit. A hard-to-machine alloy, or a stock size that leaves a lot of material to remove, raises both the bar cost and the cycle time.
- Secondary work left out of the target. Heat treatment, anodizing or plating, masking, part marking, cleaning, special packaging and inspection documents are all real cost lines that a machining-only target ignores.
How do you set the target price for a new machined part?
Work back from what the product can afford, allocate a share to this part, convert it to a price at a stated quantity and delivery point, and check it against an independent estimate before anyone treats it as a requirement.
Start from the product, not the part. Target costing starts with the selling price the market will bear, subtracts the required margin and the costs that are not parts (assembly, test, warranty, freight to the customer), and leaves an allowable product cost. That allowable cost is then split across assemblies and parts. Split it by function and by how much room each part has to get cheaper, not evenly: a housing that carries the sealing faces and bearing bores deserves a larger share than a bracket.
Turn the share into a purchase price with a basis. A part target is useful only if a supplier quote can be laid next to it. Write down the release quantity and the annual quantity, the material and finish, the currency and the year, and the delivery point. If the part will be imported, the comparison is on landed cost, so duty, fees and freight belong in the target; the landed cost guide lists those adders. Keep one-time costs such as fixtures, programs and first article inspection out of the unit target and state them as a separate budget, because they are quoted separately; the NRE guide explains how.
Check the target with an estimate, not a feeling. The GAO guide describes the main estimating methods: analogy to a similar item, engineering build-up from labor, machine time and material, and parametric relationships fitted to past data. Early in design, an analogy to a part you already buy is usually the best available check. Once the geometry exists, a build-up of stock, setups, cycle time, finishing and inspection shows which line will break the target. If the estimate and the target are far apart, settle that before detailed design, either by changing requirements or by changing the target, because a target nobody believes will be ignored.
| Worksheet line | What goes in it | Where the number comes from |
|---|---|---|
| Allowable product cost | Selling price minus margin and non-part costs | Product plan, owned by the program |
| Share for this part | Allocation by function and cost-reduction room | Engineering and purchasing together |
| Ground rules | Release and annual quantity, material, finish, currency, year, delivery point | Written on the target sheet and the RFQ |
| Landed adders | Freight, duty and fees, incoming inspection | Tariff schedule, freight quotes, receiving plan |
| Unit price target | Share minus landed adders, at the stated quantity | Calculated |
| One-time budget | Fixtures, programs, first article, gauges | Stated separately, never inside the unit target |
| Independent estimate | Analogy early, engineering build-up once geometry exists | Cost engineering or a budgetary quote |
| Risk reserve | Allowance for material price moves and design changes | Sensitivity check on the largest cost lines |
Which design decisions lock in the cost of a machined part, and when?
The process route, the material and the part layout lock most of the cost at the concept stage, before a detailed drawing exists. Tolerances, finishes and inspection requirements lock the rest on the drawing and the RFQ.
The order matters because each decision is cheap to change before it locks and expensive after. Whether a part is machined from solid bar or plate, or cast near shape and then machined, is the largest single choice and it is usually made in the first layout. The envelope and the number of faces that carry features decide how many setups the part needs. Corner radii, pocket depth and hole sizes decide the tools. The general tolerance block and the functional tolerances, written per ASME Y14.5 or ISO 2768-1, decide how carefully every feature must be cut and checked, and the surface texture callouts (a separate set of standards, ASME Y14.36 in the US) decide how many faces need finishing passes. The inspection and documentation package decides how long each lot spends on the bench before it ships. Use the table as a review list at each design gate.
| Decision | When it locks | How it moves cost | What to do before it locks |
|---|---|---|---|
| Process route (solid vs cast or forged blank) | Concept | Trades machining time against tooling and volume | Price both routes at the real annual quantity |
| Material and stock form | Concept | Bar or plate price, machinability, chips removed | Pick a common grade and a standard stock size close to the envelope |
| Envelope and feature faces | Layout | Number of setups and fixtures | Keep features on as few faces as function allows |
| Corner radii, pocket depth, hole sizes | Detail design | Special or long tools, slower cutting | Use standard drill and cutter sizes; avoid deep, narrow pockets |
| General tolerance block | Drawing | Applies to every untoleranced dimension | Default to ISO 2768-1 class m; tolerance functional features only |
| Surface texture and cosmetic notes | Drawing | Extra passes, handling, rejects on appearance | Call out texture only on functional surfaces; define cosmetic sides |
| Finish, heat treatment, marking | Drawing | Outside processing, masking, extra handling | Name the specification; check thickness against fits |
| Inspection and documents | RFQ and PO | Bench time per lot, reports, certificates | Mark the features that need data; sample the rest |
How do you get supplier cost feedback before the drawing is released?
Send a preliminary model and a marked-up sketch drawing to one or two suppliers at the layout stage, with the quantities and finish, and ask for a budgetary price plus the features that drive it. Do it while a change still costs an hour of CAD time rather than a revision and a re-quote.
What to send. A STEP model, a sketch drawing that marks the critical-to-function features and leaves the rest to the general tolerance block, the intended material and finish, and the release and annual quantities. Say plainly that the design is preliminary and that you want cost feedback, not a binding quote. Suppliers answer that question differently from a formal RFQ, and the useful answer is the list of features they would change.
What to ask back. Ask for the price at two or three quantities, the one-time costs listed separately, and the main cost lines in plain terms: material, machining, finishing, inspection. The US federal acquisition rules draw the same line between checking a total price and reviewing its separate cost elements, which FAR 15.404-1 calls price analysis and cost analysis. You rarely need a full cost breakdown, but knowing which line dominates tells you where a design change will pay.
Whether to share the target. Sharing the number early invites quotes that land just under it and tells you little. A better sequence is to share the cost basis and ask for the drivers first, compare the answer with your own estimate, and share the target only when the gap is understood and you want ideas to close it. Keep a short log of each design revision and the budgetary price it drew, so the team can see which changes actually moved the cost.
Freeze, then quote formally. Once the cost-driven changes are in, release the drawing and send the formal RFQ to the full supplier list. The formal quotes should now cluster near the estimate. If they do not, go back to the clustering test above before anyone negotiates.
What should the drawing and RFQ say so the cost target survives quoting?
The drawing should make the cheap reading the correct one: functional features toleranced, everything else to a stated general tolerance, finishes named by specification. The RFQ should carry the cost basis, ask for alternatives, and ask for one-time costs separately.
- General tolerance. “Untoleranced dimensions per ISO 2768-mK” (m is the linear class from ISO 2768-1, K the geometric class from ISO 2768-2) or your own block, chosen on purpose rather than inherited from the last drawing.
- Critical features marked. Identify the features that carry function, so the supplier knows where to spend inspection effort and where sampling is acceptable.
- Surface texture. Only on surfaces that seal, slide or bear; a general texture note for all other machined surfaces.
- Finish and treatments. Named by specification, with the surfaces that must be masked, so finishing is priced and not guessed.
- Quantities. Release quantity and annual quantity, with a request to price at more than one of each.
- Alternatives invited. “Supplier may propose material, stock or process alternatives with price effect; any change requires written approval and a drawing revision.”
- One-time costs. Fixtures, programs, first article inspection and any tooling quoted as separate lines.
- Inspection scope. Which features need recorded data, which need a gauge check, and which documents ship with each lot.
The RFQ package guide lists the files and notes that every machining RFQ needs; the points above are the ones that decide whether a design to cost target holds once real quotes arrive.
The formal quote is still above target: how do you close the gap?
Confirm the quote and the target share one basis, find the cost line that breaks the target, change the design or requirement behind that line, and re-quote only the changed items. Negotiate last, and only on a gap that is left once the basis matches and the drivers are removed.
- Match the basis first. Lay the quote next to the target sheet: quantity per release and per year, material grade and stock form, finish, inspection documents, currency and delivery point. A quote at a smaller release, with a certificate set you did not need, or priced to a different delivery point, is not a miss yet. Correct the basis and ask for the price again.
- Get the split. Ask for the price divided into material, machining, outside processing such as finishing or heat treatment, inspection and packing, plus the one-time costs. This is the cost-element view that FAR 15.404-1 calls cost analysis; a rough split is enough to show which line dominates.
- Attack the biggest line with the lever that fits it. If material dominates, check the grade and whether a standard stock size closer to the envelope would remove less metal. If machining dominates, ask which features add a setup, a special tool or a slow finishing pass, and whether a tolerance or texture callout on a non-functional feature is behind it. If outside processing dominates, check the finish specification, the masked areas and whether every surface needs the finish. If inspection dominates, limit recorded data to the critical features.
- Re-quote the change, not the whole package. Send the specific revision with the question “what does this change do to the price?” and log the answer next to the revision, so each change is credited with its real effect.
- Escalate a residual gap as a decision. If the gap survives, present it with the remaining options: relax a requirement, change the route (for example a near-shape blank), change the quantity basis, or move the target. That is a program decision, not a purchasing one.
How is a design to cost part handled on a Saola order?
On a Saola order, CNC turning and milling are done at our lead CNC plant, T.K Viet Nam Precision Company Limited, and casting, stamping and surface finishing go to partner plants we manage. Every quote names the production site and the country of origin, so the landed cost can be compared with your target on the same basis.
You can send a preliminary model for budgetary feedback before release, as described above, or a released drawing for a formal quote. Turned features are cut on CNC lathes, as shown on the CNC turning page, and prismatic features on machining centers, as shown on the CNC milling page. A quote gives a unit price at your volume, the tooling cost, and a short manufacturability note that can flag the features driving the price; ask for more than one quantity if your target basis has more than one.
If a cast blank finished by machining could meet the target better than machining from solid, the casting is placed through die casting partner plants we manage, and the quote states where that work is done. Because the production site sets the country of origin, and origin affects duty, compare routes on landed cost rather than unit price. ISO 9001 certification is in progress, not held. Send the model, the drawing and your quantity basis through the quote form.
Frequently asked
Should you tell a supplier your target price?
Not at first. Share the cost basis and ask which features drive the price, then compare that answer with your own estimate. Share the target once the gap is understood and you want the supplier’s ideas to close it; shared too early, it mostly attracts quotes that sit just under it.
What is the difference between design to cost and value engineering?
Design to cost works before release: the target shapes the design while it can still change cheaply. Value engineering looks for requirements that add cost without adding function. It can be applied at any stage, but in purchasing it is most often applied to a released or production part, where each change needs a drawing revision and may need requalification.
Is design to cost the same as target costing?
They are close relatives. Target costing is the accounting side, which derives an allowable cost from the market price and the required margin. Design to cost is the engineering side, which treats that allowable cost as a design requirement and tracks the design against it.
What if the cost target cannot be met?
Show which cost line breaks it, with an estimate or a budgetary quote, and offer the choices: relax a requirement, change the material or process route, change the quantity basis, or move the target. A miss explained with data before release is a decision; a miss found at the first production quote is a crisis.
How reliable is a budgetary quote on a preliminary model?
It is as good as the information behind it. A budgetary price on a model with the material, finish, quantities and critical features stated is a useful check; one on a bare model is a guess. Treat it as feedback, not a commitment, and expect the formal quote to differ where the drawing added requirements.
Sources
- MIL-STD-337, Military Standard: Design to Cost (canceled), US Department of Defense, 1989, via EverySpec, accessed October 2026
- MIL-HDBK-766, Military Handbook: Design to Cost (canceled), US Department of Defense, 1989, via EverySpec, accessed October 2026
- GAO-20-195G, Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Program Costs, US Government Accountability Office, 2020
- FAR 15.404-1, Proposal analysis techniques, Federal Acquisition Regulation, accessed October 2026
- ISO 2768-1:1989, General tolerances, Part 1: Tolerances for linear and angular dimensions without individual tolerance indications, ISO, 1989
- ASME Y14.5-2018, Dimensioning and Tolerancing, ASME, 2018