If you’re in the market for a new propane bulk storage tank, then you’ve probably made some calls and gotten some bids from multiple sources. What may have surprised you during the process is a bid that came in quite a bit lower than the rest. How can it be that one supplier has a price that is 20-30% less than the others? Did you get lucky and find a great deal? Maybe. Are pricing strategies among the suppliers really that different? Could be. Or is there something else going on? Probably. Most of us know that when a situation like this occurs, there is more to it than meets the eye.
As an independent agent, our job is to bring buyers and sellers together to facilitate a sale. Each day, we collect and furnish market information regarding prices, products, and market conditions. So whenever we see a price that is significantly different from others, our first reaction is more suspicion than it is excitement about a new opportunity. We recently collected pricing on a new 30,000 gallon storage tank for a customer. Most bids came in at or around $80,000 but one came in at $65,000. We dug a little deeper into the lower bid and discovered that; a) saddles were not included in the price, b) the price didn’t include loading, and c) the freight estimate was substantially higher.
A pair of steel saddles on a 30,000 gallon storage vessel can add anywhere from $2000 to $6000 or more. Not surprisingly, the supplier that came in with the lowest tank price hadn’t included saddles in his price and when asked what the cost was, provided an amount that was among the highest prices we had ever seen for saddles. When getting a tank quote and the supplier provides a bid for a “slick” or “bare” tank, be sure to ask for the additional cost of steel saddles.
Another way for suppliers to affect pricing is their handling of delivery terms. As we looked further into the low tank bid, we discovered that the price was “Ex-Works”. Ex-Works is the sale term most suited to the seller. Under ex-works the seller only has to make the tank ready for pick-up at his shipping location and is not responsible for loading on to the truck provided by the buyer. For most situations, the buyer will be better off if the terms are “FOB (name of shipping location)”. FOB or Free On Board means that the seller must load the tank onto the truck at the shipping location and does not charge an extra fee for that service.
Freight pricing is one more opportunity for suppliers to influence their tank bid. Generally speaking, the cost for freight on a 30,000 gallon storage tank will run around $6 to $8 per mile. We asked for a freight estimate from the supplier of the low-priced tank and received a bid that came in at over $12 per mile. Fortunately, buyers aren’t required to utilize the tank supplier’s freight service. If you suspect excessive freight costs are included in a bid, find another source for freight.
When comparing prices for new propane bulk storage, make sure all costs are included in every bid and you’re comparing apples to apples. If something looks too good to be true, then it probably is.