Cost vs Quality – The perpetual conundrum

The cost vs quality tradeoff is a common dilemma faced by many industries, including construction. Here we summarise our understanding based on responses from the industry leaders.

March 31, 2023

Author: Shashank Vaidya - Director

construction industry, cost based decisions, leadership, preventive quality management, Quality Management, tradeoff

The literature of Quality Management is full of principle of ‘Cost of Quality’. However, few organizations have been able to put in place a cost-effective mechanism to measure and control the cost of quality (both cost of poor quality and cost of good quality). In the absence of hard numbers, leaders and managers are left with only an intuitive understanding about the cost-quality equation. Some are convinced that ‘quality is free’ or that investment in quality more than just pays for itself. Such leaders commit their organizations to invest in quality and reap the rewards. Some others lack a deep-seated belief about the positive effect of quality on cost and end up paying only lip service to the cause of quality.

If only managers and leaders had hard accounting numbers connecting the cost of prevention, appraisals and failures, the behaviour of leaders could be easily moulded in favour of preventive Quality Management. Juran, one of the foremost proponents of Quality Management believed it was important to directly link quality issues with costs. Linking quality, conformance and defects to dollars and profits was the only way to drive true change, thus unifying workers and senior management.

In the course of our interaction with decision-makers in the construction business and having observed the drivers of various decisions, both of strategic nature and mundane day-to-day decisions, we have seen that there are many occasions where there is a conflict between cost & quality OR cost & time. More often than not, managers choose cost over quality or cost over time. A few examples of such choices are listed below:

Choosing a supplier of RMC purely from the consideration of cost. The risk inherent in buying concrete which may result in 28 days in-situ compressive strength not meeting the requirement is overlooked. This is often because the acceptance criteria of concrete based on principles of statistics is not understood and applied fully.
Reluctance to pay for curing compound, which on paper comes out costlier than conventional curing by water. It is common knowledge that effective curing is rarer than ‘rare earths’. The root cause of this is the fact that not many engineers in the field can accurately work out the quantity of water required to fully concrete for 7 continuous days. May be the rot runs deeper and there is a false belief that lapses in curing of concrete will not result in any defect/problem.
In one extreme case, a construction head of a large project overruled the Quality Manager and decided to start a large concrete slab pour while the reinforcement was only partly completed and the Quality control team has yet to clear the pour. The construction head was driven by the target of completing the concrete quantity for the month.

Experts and researchers who have studied the issue of Cost of Quality (COQ) have identified many benefits that can be realized from the use of information generated from a COQ measuring system:

Recognition of deficiencies in the organization’s quality system
Identification and elimination of the organizational activities that do not provide or enhance quality
A means for monitoring operational performance and identifying areas for
Improvement with respect to costs
Provide financial justification for future quality initiatives
Introduction of a bottom‐line orientation to quality
A guide for making cost‐related, fact‐based strategic decisions

Unfortunately, the benefits that are supposed to accrue are all intangible, uncertain and in the future, whereas the benefits of choosing cost/time over quality are all visible, immediate and certain in the limited context of direct cost! No wonder many succumb to the temptation of choosing short term benefit even at the risk of pain and problems later.
Unless the cost-quality trade-off is unequivocally established to be in favour of quality in long and medium term, the concept may remain attractive on paper but a non-starter on the ground.

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