How useful are Quality Ratings for construction projects?

May 26, 2020

Shashank Vaidya - Director

HIGHLIGHTS

Is deriving numerical score in carrying Quality Audit a feasible approach ?
KRAs/Performance Metrics as per Quality Rating system may not cover subjective complex technical information of quality audit report
Quality Audits with properly framed NCRs are more effective in identifying area of improvement
Well drafted contract agreement enforces contractor to carryout quality construction work

As a part of our (Gem Engserv) services related to Quality Management, we offer Quality Audits as well as Third-Party Quality Control services amongst many other services. In the course of discussions to understand how best to serve them (scoping), some clients enquire if we can provide quality rating as a part of our service offering, most often bundled with Quality Audits. This desire of the client’s senior management to derive a numerical score as a proxy of the quality of their project is the basis of this article.

The need for converting assessment of quality into a number most probably stems from the principles of ‘Management By Objectives’ that business leaders are trained to practice. They are more comfortable with KRAs / KPIs / performance metrics than a quality audit report which may run into many pages and contain complex technical information, which can also be very subjective in nature. Let us dig a little deeper into quality ratings and their usefulness to the management.
The purpose of obtaining quality rating for a construction project could be one or multiple out of the following:

To benchmark project quality within or outside the organization
To identify areas of improvement (regarding quality)
To have an objective measure to incentivise performance related to quality
To obtain an ‘objective looking’ assessment to create price differential

Let us analyse whether quality rating fulfils these objectives.

Benchmarking:
Projects are unique, their locations vary, work volume fluctuates, employees and key team members change, the work is labour intensive, the workforce tends to be transient, projects are subject to change and delays, the supply chain is extensive, multiple organizations having differing visions, values, processes, and practices are involved, weather can vary, some partners fail to deliver on their promises, the industry is generally confrontational rather than cooperative in relationships. Therefore, it is very difficult to compare one project with another for any aspect of project management, quality being no exception. Unless an industry wide system (such as CONQUAS of Singapore) is adopted, which deploys an independent and trained assessor using a common scoring system, the objective of benchmarking is not likely to be met.

Quality Improvement:
It is also difficult to accept that we require a numerical score to identify scope and areas of improvement in project quality. Quality ratings would be computed based on some process or product performance measures and these individual aspects (not a quality rating) will point to the action required for bringing about an improvement. Further, it should be understood that the rating mechanism, unless derived from a physical measure (such as strength or dimension), only converts a subjective assessment into a number. It does not necessarily convert subjectivity to objectivity! Quality audits, with properly framed NCRs, providing audit criteria and audit evidence are far more effective in identifying the area requiring improvement. In fact, the specific action required to cause the improvement is neither obtained from a score nor even from an NCR. A proper root cause analysis is essential to locate the real issue and address it.

Incentivising Performance:
This can be analysed individually for the two key parties involved on a project – the contractor’s team and the Client / developer / owner’s team (employees).

For encouraging any contractor to carry out construction work with high emphasis on quality requires a well drafted contract agreement, effective technical specifications, detailed acceptance criteria and clear provision in the contract connecting reward and penalty to fulfilment or otherwise of the acceptance criteria. In the absence of any of these, quality score or ratings will not be effective by itself. This is to suggest that a contract agreement and a clear understanding of the conditions within the contract would be far more effective in “nudging” the contractor’s team to focus more on quality.

Similarly, employees get motivated to adhere to quality requirement when there is a culture of quality in the organization. This typically percolates from top to bottom and has to be demonstrated and emphasized by the management. Quality ratings can be one method of exhibiting top managements’ commitment and focus on quality, but that is not enough by itself. In addition to this subtle but consistent communication, policies and guidelines should clearly link the career goals (or appraisal parameters) of employees to the quality of the projects that they are working on. This linkage would not only drive them to ensure that the principles of quality are followed on their projects; but be another subtle communication about the culture of quality within the organization.

Price Premium:
Using the achievement of high ratings for quality in order to command a premium is also not that straight forward. In order to enable this, we must be sure what exactly is meant by the term ‘Quality’. In almost all cases (including CONQUAS), the quality ratings focus on the quality of construction only. In this sense, it is basically a rating of the degree of compliance to specifications, rather than the quality as perceived by the customer. Many aspects such as location of the project (in case of real estate construction), quality of design, and after-sale service contribute significantly to customer’s perception of quality. Constructing a poorly planned and designed building that is fully conforming to technical specifications shall hardly qualify for a premium price!

The above analysis may give the impression that I am totally against quality ratings. I would like to dispel this thought. The idea in this article is to present the subject in totality so that the tool of quality rating is appropriately designed and used. Even if we were to restrict our discussion to rating only the quality of construction (and not design), we need to decide what we are going to assess. Will we assess and rate the finished product or the quality management process or a combination of the two?

Assessment of product quality must necessarily rely on random inspection and use statistical concepts to arrive at some meaningful number. CONQUAS system is based on this principle. However, the management must conduct their own detailed analysis to identify improvement action. The more one chooses to focus on assessment of quality processes, the closer to a classical quality audit it will be. In this case, getting a single number out of the audit report is simple arithmetic.

To sum up, quality ratings, like the term quality itself can have multiple contexts, interpretation, and use!