CAPEX Approval Series
CAPEX Approval Process
An eight-step guide to getting industrial capital expenditure approved: what each stage must prove, the documents it needs, a pre-submission checklist, and how to put comparable quotations in front of your committee.
Capital requests for industrial equipment are rarely rejected on strategy. They are deferred because the evidence is incomplete: the baseline is anecdotal, the do-nothing option is unpriced, or the quotations attached to the case are not comparable. This page sets out the approval process step by step, then gives you the checklist to run before you submit. For the same sequence read from each approver's point of view, see the executive briefings on CAPEX approval.
Stuck at step 05: comparable quotations
Most capital requests stall because the quotations in front of the committee cannot be compared. Send us the specification and we convert it into one structured RFQ, qualify manufacturers against it, and return like-for-like offers with delivery, warranty and payment terms side by side — free for buyers, and independent of manufacturers and lenders.
The CAPEX approval process, step by step
01
Define the problem with measured data
State the constraint in numbers — downtime hours, yield loss, energy per tonne, rejected batches, capacity shortfall against demand. A request built on opinion is the easiest one for a committee to defer.
Output: One-page problem statement with a baseline you can defend.
02
Price the do-nothing option
Quantify what continuing as-is costs over the same horizon as the investment. Without this benchmark, reviewers have nothing to approve against and the case reads as a preference rather than a decision.
Output: Cost of inaction over 3–5 years.
03
Compare alternatives on one basis
Refurbish, debottleneck, contract out, lease, or buy new. Compare on the same scope boundary, the same horizon and the same volume assumptions, or the comparison will be rejected.
Output: Options table with cost, risk and time-to-benefit.
04
Freeze the technical specification
Capacity, utilities, footprint, hygiene and safety standards, automation level, integration points and acceptance criteria. Specification changes after quotations arrive are the most common cause of a lost budget cycle.
Output: Frozen specification plus scope-of-supply matrix.
05
Obtain comparable quotations
Three or more qualified suppliers, quoting the same scope boundary, with installation, commissioning, spares, training, freight and duties made explicit rather than assumed.
Output: Like-for-like quotation comparison.
06
Build the financial case
Payback, NPV and IRR against the hurdle rate, a total-cost-of-ownership view including energy, labour, maintenance and downtime, and a downside case showing what happens if volume lands 20% below plan.
Output: Financial model with sensitivity run.
07
Confirm the funding route before authorisation
Cash, leasing, equipment finance, or export credit. Eligibility conditions tested after the supplier is selected frequently force a re-tender, so test them while the shortlist is still open.
Output: Funding plan with indicative terms.
08
Authorise, deliver and post-audit
Approve at the correct authority threshold with a named delivery owner, then audit the asset against the assumptions that justified it. Post-audit credibility is what makes your next request easier to approve.
Output: Signed capital request, risk register, post-audit report.
Who signs at each stage depends on the value band — that is covered in the capital expenditure approval workflow. For the structure of the document itself, use the CAPEX business case template, and if ownership is still in question, work through the CAPEX vs OPEX decision.
Pre-submission checklist
Run this before the request reaches the committee. Anything unticked is a question you will be asked in the room.
Evidence
- Baseline measured over a representative period, not a worst week
- Do-nothing cost quantified over the investment horizon
- Demand or volume assumption sourced from sales or contracts, not extrapolation
Scope and specification
- Specification frozen and version-controlled before the RFQ goes out
- Scope-of-supply matrix showing what each supplier includes and excludes
- Utilities, civil works, integration and removal of the old asset priced
- Acceptance criteria and performance test defined in writing
Commercial
- Three or more qualified suppliers quoting the same scope
- Installation, commissioning, spares, training, freight and duties itemised
- Warranty length, response times and service coverage compared
- Delivery lead times confirmed against your required start date
Financial
- Payback, NPV and IRR calculated against the company hurdle rate
- Total cost of ownership over the asset life, not purchase price alone
- Downside case run at reduced volume or delayed start
- Funding route confirmed and eligibility conditions tested
Governance
- Correct authority threshold identified before submission
- Named delivery owner and project schedule attached
- Risk register with mitigations and owners
- Post-implementation audit date agreed at approval
Numbers committees challenge most
- Uptime and reliability assumptions — state the basis and check them against MTBF and availability data from the suppliers.
- Equipment scope and price realism — benchmark against comparable packages in the industrial machinery categories.
- Funding cost and cash impact — model it in the financing calculator before the request is written.
- Delivery and commissioning schedule — anchor it to the lead times confirmed in your RFQ process, not supplier marketing.
Frequently asked questions
What is the CAPEX approval process?
The CAPEX approval process is the sequence a capital request follows before money is committed: define the problem with measured data, price the do-nothing option, compare alternatives, freeze the specification, obtain comparable quotations, build the financial case, confirm funding, and authorise at the correct threshold with a post-implementation audit afterwards.
What are the steps in a CAPEX approval process?
Eight steps in most industrial companies: problem definition, do-nothing costing, options appraisal, specification freeze, comparable quotations, financial case, funding confirmation, and authorisation plus post-audit. Smaller replacement spend compresses several steps but rarely skips the financial test.
How long does the CAPEX approval process take?
A budgeted request with complete documentation can clear in weeks. Unbudgeted requests, board-level thresholds and externally financed projects typically take months, because financing eligibility and independent technical review run in sequence rather than in parallel.
What documents are needed for CAPEX approval?
A problem statement with a measured baseline, an options appraisal including do-nothing, a frozen technical specification, three or more comparable quotations, a financial model with payback, NPV, IRR and a downside case, a total-cost-of-ownership comparison, a funding plan and a risk register with named owners.
Why are capital requests rejected or deferred?
Most rejections are documentary rather than commercial: a moving specification, quotations that are not comparable, an unpriced do-nothing option, missing installation and training costs, financing eligibility tested too late, or no named delivery owner.
How do I get comparable quotations for a capital request?
Issue one structured RFQ with a frozen specification and an explicit scope boundary to several qualified manufacturers, and require each to price installation, commissioning, spares, training and freight separately. Global B2B Group runs this process for buyers at no cost and is independent of manufacturers and lenders.
Stuck at step 05: comparable quotations
Most capital requests stall because the quotations in front of the committee cannot be compared. Send us the specification and we convert it into one structured RFQ, qualify manufacturers against it, and return like-for-like offers with delivery, warranty and payment terms side by side — free for buyers, and independent of manufacturers and lenders.
Continue in the CAPEX approval series
Educational, supplier-neutral and financing-neutral
Global B2B Group does not sell equipment and does not represent lenders, export credit agencies or development banks. This material is published to help industrial organisations plan, structure and prepare capital projects. It is general information for decision-making, not financial, legal or tax advice.