Ok, so if I'm reading you right, you estimate the value of cutter life consumed per hour and add that to the job rate? That sounds like a lot of guess work.
I'm not listing the cutters when I bill the customer, just adding it to the cost, along with a rate per hour (including programming and setup) and the material. Just wondering if people have a convenient way for keeping track of what 20% used up endmill has been billed to which customer, so they can get the value of the rest of it's life that they've already paid for.
I think he's saying something more like this:
Jobs in aluminum bill at X per hour.
Jobs in steel bill at Y per hour.
Jobs with really strange materials or unusual tools bill at Z per hour.
There are three reasons as a customer that I might want to go with time/materials:
1. There's something about it that carries a lot of risk. Rather than you over pricing the risk to avoid coming out negative I accept the risk so I don't have to pay for the over estimate. Might cost me more, might cost me less, but I take on the risk that it might end up being really expensive so that you don't have to quote as conservatively.
2. So that I don't have to think much about it and justify it to my boss. Note, as soon as you start adding more details to it there are more things I might have to justify or explain.
3. Because the cost of quoting, writing a PO, etc. will take too much time relative to the cost of the job. If you and I both know it's going to cost about $50 and you're going to have $20 in margin I'm not going to ask you to send me a formal quote in long form on my custom quote form. That extra hour of paperwork will make it a $200 job.
Having been on both sides of the fence, I understand both positions, but the way shops explain tooling charges often really irks me. For example, say my normal jobs cost X. I RFQ a similar job, but it requires an unusual tool you don't have, so you quote it at X+Y where Y fully covers the cost (plus a bit since it might go wrong) of the unusual tool that won't wear out (say a custom roller burnisher that you don't otherwise need). You specifically tell me it's higher because you had to buy tool Y, and I'm ok with this. That's on me for picking a job with a quantity of 3 that requires a $300 tool. That job is going to run me around $100/part more.
When I send in the same job 2 months later, it should now cost something close to X, not X+Y because you already have the tool.
If there's some other reason (it took longer than you thought, had a high scrap rate, was just a PITA to make, etc.) then just say that, don't keep relying on the tool like someone who needs time off because their grandmother died for the 7th time this year. Bonus points if you tell me what's such a PITA about it so I can adjust.