Capital budgeting during bidding stage, is a practice which is either formally or informally conducted when companies prepare bids, whether creating simple cash flow projections or using sophisticated forecast models. Companies must incorporate these practices, to ascertain the potential of a venture and its profitability. Unfortunately given time and resource constraints, this step is sometimes, not actively pursued in organizations which has had adverse effects.
The recent developments over last 2 years has amplified the need for this practice as unprecedented losses have been sustained, which has required careful consideration of factors influencing project prospects. The goal of this study was to examine the significance of capital budgeting throughout the bidding process and how, if used actively, may help minimize losses.
Through the critical review of available literature, independent variables most affecting successful capital budgeting were identified as follows;
• Ease, familiarity and willingness to execute capital budgeting during bidding stage
• Accurate data availability, analysis & projections
• Successful navigation of bounded rationalities
• Considering extreme scenarios during bidding stage
Hypotheses were established in order to observe the influencing factors towards successful capital budgeting. Then, using operationalization, a questionnaire was created to gather information from more than 150 persons considered as the sample, working on projects for the XYZ Company. To determine whether each hypothesis was viable, the gathered data were put through a software analysis and the results were analyzed to validate the hypotheses made.
The study revealed that all variables contributed significantly towards the successful implementation of capital budgeting during bidding at varying levels.
Finally, this study offered actionable suggestions for XYZ Company to enhance capital budgeting procedures in order to complete projects successfully. The study provided direction and suggestions for further research due to the study’s limitations and conclusions.