Capital Equipment Projects
Capital equipment projects are equipment purchases with the goal of acquiring, developing, improving or maintaining a capital asset, which are income-generating assets. Examples of capital equipment projects might be the purchase of a new generator, an additional generator or even simply a better generator that will increase the value of the capital asset.
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Determining Need for Capital Equipment Project
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The most important step in a capital equipment project (CEP) is accurately and realistically determining the need for the project. Most organizations identify CEP not only by the support of a capital asset but also monetarily. Determining the need for the CEP may involve Six Sigma, LEAN, other Total Quality Management tools or may simply be the very obvious need to replace a piece of equipment that is no longer functioning. However, when you are replacing a piece of equipment that is no longer functioning you are not planning your CEPs efficiently.
Budgets for Capital Equipment Projects
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Budgets for Capital Equipment Projects (CEPs) may be small or run into the millions of dollars. CEP budget approval is required at the executive levels. CEPs need to be planned well in advance, even for the largest of companies, as the reinvestment of the company's profits and the return on investment (ROI) of the CEP needs to be determined and proven valid use of the monies. The depreciation of equipment purchased in a CEP will often be taken over multiple periods, so therefore the calculation of the ROI should be calculated over multiple periods as well.
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Approval for Capital Equipment Projects
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Capital Equipment Projects (CEPs) require approval at many levels: managerial, executive and C-level executive. The approval process requires documentation. Submission of requests for CEPs requires quotes for the equipment purchase. Companies have different standards for quotes, however many require at least three quotes for comparable equipment. A quote is garnered by submitted a Request for Quotation (RFQ) to companies providing the equipment that is to be purchased. The quote should include specifics about the piece of equipment but also about the financial terms of the contract.
Capital Equipment Project Plans
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The plan for Capital Equipment Projects (CEPs) should include identification of all resources, including personnel, time and monies. There are many ways to write up a plan for a CEP, however a Gantt chart is a chart that illustrates a project and the required resources. A Gantt chart is based on the work breakdown structure of management, which accounts for 100 percent of the work required for a project into unique pieces identifying resources, goals and deadlines.
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