TANK AND VESSEL · SPECIALTY · FIXED BY STEP 04

You Sell in Gallons and Buy in Pounds

Seismic revisions bumped two shell courses, your plate order grew by 25,000 pounds, and the owner still calls it a 500,000-gallon tank.

WHY IT'S A TANK AND VESSEL PROBLEM

Most trades sell in roughly the unit they buy in: square feet of board, feet of conduit, and cubic yards placed. A tank is sold in gallons, bought in pounds, and built in weld inches, and nothing in the estimate, the contract, or the pay app is denominated in the unit the money moves in. That missing translation is why a design revision can take your margin without ever looking like a change to anyone reviewing it.

WHAT IT COSTS

The size of it

An eighth-inch bump on two shell courses adds 20,000 to 30,000 pounds of plate and several hundred weld inches, $40K to $70K of cost, and the change order gets denied because the deliverable is still a 500,000-gallon tank.

OVERHEAD AT $1M to $5M

15%

CFOS target 14% for tank and vessel.

GROSS MARGIN AT $1M to $5M

23%

CFOS target 25.5% for tank and vessel.

NET PROFIT AT $1M to $5M

CFOS target 11.5% for tank and vessel.

Capacity is what gets specified, so the contract says 500,000 gallons. Your estimator turns that into a shell configuration and prices roughly 340,000 pounds of plate. Shell course thickness comes from seismic design category, wind speed, product specific gravity, and corrosion allowance, and a revision to any one of those changes the pounds and the weld inches while the gallons stay where they started. Labor has the same mismatch: crews are productive in weld inches or diameter inches deposited, while the schedule of values is written as lump-sum percent-complete of a tank.

WHAT TO DO

Three moves, in order

STEP 01

Convert every tank estimate to pounds of plate and weld inches, and print the seismic category, wind speed, specific gravity, and corrosion allowance you assumed on the face of the bid.

STEP 02

Build the schedule of values around tonnage set and weld inches deposited so progress billing tracks the unit your cost moves in.

STEP 03

Put a written re-price trigger in the contract: any change to seismic design category, product specific gravity, or corrosion allowance reopens plate tonnage and weld quantity. Get it signed before the first submittal.

THE FIX

Step 04: Estimating system

The estimate maps one to one onto the job cost codes, so variance means something the day it appears.

CFOS-04 · CHAPTER 4

Make the estimate and the job cost report match

What this step changes, what it depends on, and how to tell it's installed.

BENCHMARKS

Tank and vessel by revenue band

All 7 bands are published. The CFOS target is beside the figure up to $10M to $25M, and the 4 bands above that are labelled modeled.

ACROSS EVERY TRADE

The estimate and the actual never match

You can compare the estimate to the job cost report, but the two use different words, so the comparison means nothing.

SAME TRADE

What else costs tank and vessel contractors money

TANK AND VESSEL · CFOS-04

The Plate Quote Expired Before You Won the Job

You bid the tank in March, won it in July, and bought the plate in August against a mill quote that expired in April.

TANK AND VESSEL · CFOS-06

Late Plate Puts a Certified Crew on the Bench

The plate is six weeks late and there's nothing else on that site your welders are allowed to touch.

TANK AND VESSEL · CFOS-01

You Pay for Coupons Before You Bill a Weld

Four welders spent two weeks cutting and testing coupons, and none of that time had a job number behind it.

TANK AND VESSEL · CFOS-07

You Finish First and You Get Paid Last

The tank has been holding water for eighteen months, the city loves it, and the owner still has your retainage.

TANK AND VESSEL · CFOS-08

Year Two Blisters Come Back to a Closed Job

The liner blistered in year two, the utility will only let you drain that tank in a low-demand window, and the job closed out two fiscal years ago.

SAME MECHANISM, OTHER TRADES

The same mechanism in other trades

DRYWALL

Level 5 gets discovered after the primer goes on

The spec said Level 4, the owner walked it at night with the wall washers on, and now there's a skim coat between you and your retention.

DRYWALL

Piece rate and square-foot bids agree on flat walls only

Your hangers make the same on a clean corridor as on a bathroom full of soffits, so guess which walls are done Friday and which ones aren't.

ELECTRICAL

You met the hours and still lost money on the rate

You bid labor in unit hours and the field met the unit hours. The loss lives in the dollars per hour you converted them at, and it moves the same direction on every job you take.

QUESTIONS

What tank and vessel owners ask

Tank bid in gallons but plate priced by the pound?

Seismic revisions bumped two shell courses, your plate order grew by 25,000 pounds, and the owner still calls it a 500,000-gallon tank.

What does it cost?

What do I do first?

Convert every tank estimate to pounds of plate and weld inches, and print the seismic category, wind speed, specific gravity, and corrosion allowance you assumed on the face of the bid.

What are tank and vessel contractors supposed to be making?

Tank and vessel has 23% gross margin, 15% overhead and 8% net profit after taxes at $1M to $5M. The all-trade average is 7%, so this trade is 1 point above it. The CFOS target is 11.5%.

Which part of the system fixes it?

The step is number 04, estimating system. The estimate maps one to one onto the job cost codes, so variance means something the day it appears. It comes from chapter 4 of CONTROL: C.F.O.S. Construction Financial Operating System.

OR HAVE IT HANDLED

Everything on this page is something you can install yourself, and CONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for tank and vessel contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, led by the same author.

What a fractional CFO does for tank and vessel contractors

AUTHOR

JOSH LUEBKER

MASTER ELECTRICIAN · 150+ PROJECTS · $2.1B+ MANAGED

Wrote CONTROL, the 8 step system behind these figures. More about the author.