Capital Expenditure Request Justification
Every capital dollar must be defensible. This policy defines the mandatory justification criteria, approval thresholds, and documentation requirements for acquiring any fixed asset with a useful life exceeding one year and a value above $5,000 CAD.
Capital Expenditure (CapEx) requests must demonstrate a clear operational need, quantifiable return on investment (ROI), and alignment with the annual capital budget. This policy mandates a standardized Capital Expenditure Justification Form that includes asset description, cost breakdown, expected useful life, NPV/IRR analysis, and risk assessment. Any request exceeding $50,000 requires CFO approval; all requests must be accompanied by at least three competitive quotes unless a sole-source exception is granted.
This policy applies to all departments and subsidiaries of the corporate entity when acquiring tangible or intangible fixed assets—including machinery, vehicles, computer hardware, software licenses (above $10,000), leasehold improvements, and major upgrades—with a per-unit cost ≥ $5,000 and a useful life > one year. Operating expenses (OpEx) under this threshold follow the standard purchase requisition policy. Capital leases and build-to-suit assets are also covered. Exceptions for emergency replacement of critical equipment must be documented within 48 hours.
- All CapEx requests must include a discounted cash flow analysis showing payback period ≤ 3 years (unless strategic exception approved by CFO). Provide NPV at 10% discount rate and internal rate of return (IRR) ≥ 15%.
- Competitive bidding required: minimum three qualified vendor quotes. Sole-source justification must be pre-approved by Procurement and detail why only one vendor meets technical specifications.
- Requests must align with approved annual capital budget. Any unbudgeted request > $25,000 must include a plan to offset by deferring other projects or reallocating funds.
- Asset classification per CCA classes (Canada). Useful life assumptions and residual values must be documented; changes after acquisition require controller approval.
- Risk assessment required: technological obsolescence, installation delays, vendor financial health, and impact on working capital must be addressed.
- Department Head / Requestor — Initiates the CapEx Justification Form, provides business case, obtains preliminary vendor quotes, and ensures all fields are complete.
- Procurement Manager — Validates sourcing strategy, reviews competitive bids, negotiates terms, and confirms availability of budget line item.
- Financial Controller — Verifies DCF calculations, depreciation schedule, and compliance with capital budget; approves requests ≤ $50,000.
- CFO / VP Finance — Authorizes all CapEx requests > $50,000 and any strategic exceptions; presents to board if total annual CapEx exceeds 150% of plan.
- IT / Engineering (if applicable) — Provides technical evaluation, compatibility assessment, and installation feasibility.