Cost of quality and challenges in construction

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Shashank Vaidya (Director)
Cost of Quality
  • Attempt to improve quality is associated with cost
  • Understand P-A-F (Prevention, Assesment, Failure) cost model
  • Cost of Quality is linked to project objectives such as cost, speed, and safety.
  • Cost of failure accounts 10-15% of project cost

Many concepts related to Quality Management have originated in the manufacturing industry and their implementation is being attempted in the construction industry. Manufacturing industry is characterized by steady‐state processes whereas the construction industry operates quite differently. Some examples of these differences are given below:

  • Diversity in the types, forms, and shapes of construction projects
  • Geographical dispersion
  • Contractual relationships
  • Multiplicity and diversity of various components
  • Challenges in controlling environmental conditions
  • Difficulty (sometimes impossibility) of rejecting a defective element
  • Much higher ‘durability’ requirement

Therefore, methods or principles used to evaluate quality-related parameters like assessment, cost, etc. in the manufacturing industry need to be modified suitably, so that they may be applied effectively in the construction industry. The objective in a construction project is to meet the client requirements at the lowest possible cost. Any attempt to improve the quality, therefore, must consider the associated costs. It is here that the concept of ‘Cost of Quality’ (COQ) becomes relevant. Juran believed that it was important to link Quality issues with cost. Linking Quality efforts to conformance, defects and costs (and profits) is the only way to drive sustainable change in the management’s approach towards Quality. 

There are different definitions and associated models of COQ proposed by different experts/researchers. One of the simpler definitions/models of COQ is P-A-F model. As per this, COQ is the sum of the following elements.

  • Cost of compliance (or preventing non-compliance)
  • Cost of testing and inspection to assess the extent of compliance
  • Cost of repairs
These are called P (prevention), A (assessment) and F (failure) costs and the model that evolves out of this is known as the P-A-F model. This model is easy to understand and can use much of the data already available at the projects. Further, it can be applied by any contractor regardless of the sector, project size, employee competence and strength of the QMS in place. While the above sounds simple in theory, there are quite a few challenges in implementing it on a project. Some of these, in the context of the real estate sector in India are highlighted below.
  • The stakeholders in a construction project include the developer, design firms, PMC, main contractor (general contractor) and sub-contractors. There is a tendency to pass on the cost of Quality by the developer to the main contractor and from the main contractor to the subcontractor(s), through stringent provisions in the contract agreement. Much of construction today happens through sub-contracting. The developer may think that it is the main contractor that should be responsible for COQ. The main contractor may, in part, think that it is the sub-contractor that should be responsible for the COQ. Thus, something that should be of interest for all, gets pushed down to the agency which has the least resources and bandwidth to pay attention to COQ!
  • While it is easy to identify and isolate the cost of assessment, it is not easy to do so for the cost of prevention. There are many indirect interventions for preventing errors/defects that are not exclusively focussed towards quality. Part of the costs associated with training, motivation of employees, preventive maintenance of equipment, vendor pre-qualification, site logistics etc. are incurred not for quality alone, but for other project objectives such as cost, speed and safety.
  • Similar is the case with cost of failure. The measurable cost of failure (cost of repairs) is often a small part of total cost of failure which may include immeasurable aspects like delays, claims/litigation, damage to brand and loss of future business.
  • The cost accounting practice may also make it difficult to identify and isolate any cost into COQ and non-COQ bucket.
Regardless of the challenges listed above, the need and benefit of measuring COQ in construction projects has been established beyond doubt. Studies in Australia, US, UK and Turkey have reported costs of failure to be in the range of 10-15% of the total project cost. This means that the COQ must be a much larger part of the total project cost. 

If we can identify the COQ and break it down into P-A-F costs, optimising the COQ and thereby total project cost should be possible. I hope that this is a strong enough driver for interested parties to start investing in identifying COQ [the cost of this effort itself will be ‘P’ cost]!

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