King Fahd University of King Fahd University of Petroleum & MineralsPetroleum & Minerals

CEM - 515Quality Assurance

Term Paper Presentation

Understanding and Measuring the Cost of Quality on Construction Projects

By Jihad Farhat

Table of ContentsTable of Contents

ObjectiveObjective Construction Quality cost ApproachesConstruction Quality cost Approaches Quality CostsQuality Costs Identifying the Causes of Poor QualityIdentifying the Causes of Poor Quality Applying the Quality Cost ConceptApplying the Quality Cost Concept Recommendations for Future ResearchRecommendations for Future Research

ObjectiveObjective The objectives are:The objectives are:

Introduce the reader to the Cost of Quality on Introduce the reader to the Cost of Quality on Construction Projects.Construction Projects.

Develop a systematic approach for measuring Develop a systematic approach for measuring quality costsquality costs

Assess the ‘complete’ Cost of Quality for Assess the ‘complete’ Cost of Quality for construction projects construction projects

Determine the causal structure of rework by Determine the causal structure of rework by quantifying the causes, cost, and magnitude of quantifying the causes, cost, and magnitude of reworkrework

What is quality and what does What is quality and what does it cost? (1)it cost? (1)

Quality is defined as conformance to Quality is defined as conformance to requirementsrequirements

The system for causing quality is The system for causing quality is prevention of defectsprevention of defects

The performance standard is zero The performance standard is zero defectsdefects

The measurement of quality is the price The measurement of quality is the price or cost of non-conformance or cost of non-conformance

What is quality and what does What is quality and what does it cost? (2)it cost? (2)

Oberlender summarized quality costs as Oberlender summarized quality costs as follows. ‘Quality costs consist of the cost of follows. ‘Quality costs consist of the cost of prevention, the cost of appraisal, and the cost prevention, the cost of appraisal, and the cost of failure.of failure.

Quality in construction is directly related to Quality in construction is directly related to time and cost, and vice-versa. time and cost, and vice-versa.

It is essential for project managers to It is essential for project managers to understand the client’s requirements in terms understand the client’s requirements in terms of cost, quality and time and produce realistic of cost, quality and time and produce realistic estimates that match those requirements. estimates that match those requirements.

Construction Quality cost Construction Quality cost approachesapproaches

So far, only a few papers (Davis; So far, only a few papers (Davis; Abdul-Rahman; Low and Yeo; Barber Abdul-Rahman; Low and Yeo; Barber et al.; Love and Li; and a few others) et al.; Love and Li; and a few others) have been written in the context of have been written in the context of construction on how quality costs construction on how quality costs could be determined could be determined

Davis ApproachDavis Approach

The cost of quality is defined as the The cost of quality is defined as the cost of correcting deviations (rework) cost of correcting deviations (rework) plus the cost of quality management plus the cost of quality management activities.activities.

Abdul-Rahman’s Abdul-Rahman’s approachapproach

Abdul-Rahman developed a quality Abdul-Rahman developed a quality cost matrix to capture the cost of cost matrix to capture the cost of nonconformance during construction. nonconformance during construction.

Low and Yeo’s approachLow and Yeo’s approach

This approach proposed a construction This approach proposed a construction quality cost quantifying system (CQCQS).quality cost quantifying system (CQCQS).

The cost system is basically a The cost system is basically a documentation matrix that accounts for documentation matrix that accounts for quality costs expressed as prevention, quality costs expressed as prevention, appraisal and failure costs.appraisal and failure costs.

Barber et al.Barber et al.

Developed a method to measure costs of Developed a method to measure costs of quality failures.quality failures.

It was based largely upon work-shadowing. It was based largely upon work-shadowing. Personnel on-site were shadowed for a Personnel on-site were shadowed for a period of time and the quality problems period of time and the quality problems encountered were recorded.encountered were recorded.

Love and LiLove and Li

They quantified the causes, magnitude They quantified the causes, magnitude and costs of rework.and costs of rework.

A variety of sources such as interviews, A variety of sources such as interviews, observations, and site documents were observations, and site documents were used to collect the rework data, and only used to collect the rework data, and only the direct costs of rework were included the direct costs of rework were included

Quality Cost (1)Quality Cost (1) Quality costs money only if we do things Quality costs money only if we do things

wrongwrong

The cost of quality is estimated to fall The cost of quality is estimated to fall between 10% and 30%.between 10% and 30%.

The price of non-conformance is the cost The price of non-conformance is the cost of doing things wrong, and it needs to be of doing things wrong, and it needs to be eliminated. eliminated.

The price of non-conformance can be The price of non-conformance can be

greatly reduced, through systematic greatly reduced, through systematic quality improvement.quality improvement.

Quality Cost (2)Quality Cost (2) Costs associated with failure arise from Costs associated with failure arise from

both both internalinternal and and externalexternal sources. sources. InternalInternal poor quality costs such as poor quality costs such as

rework and material waste, increase rework and material waste, increase an organizations cost of operations.an organizations cost of operations.

ExternalExternal poor quality costs such as poor quality costs such as contractual claims, defect rectification, contractual claims, defect rectification, and the loss of future business, result and the loss of future business, result in loss of profits. in loss of profits.

Quality Cost (3)Quality Cost (3)

The key to improving quality and The key to improving quality and profitability is prevention.profitability is prevention.

Prevention dollars can be recovered Prevention dollars can be recovered many times over, through reduced many times over, through reduced appraisal and failure costs.appraisal and failure costs.

As more is spent on P & A, less has As more is spent on P & A, less has to be spent on correction. to be spent on correction.

Identifying the Causes of Identifying the Causes of Poor QualityPoor Quality (1) (1)

Quality costs can be used to identify Quality costs can be used to identify the causes of poor quality and to the causes of poor quality and to develop estimates of their direct and develop estimates of their direct and indirect costs.indirect costs.

All personnel, from top management All personnel, from top management to site staff, should be made aware to site staff, should be made aware of the usefulness of quality cost data of the usefulness of quality cost data to the company to the company

Causes of Quality FailureCauses of Quality Failure Communications, e.g. poor information control, Communications, e.g. poor information control,

Misunderstandings;Misunderstandings; Plant and equipment, e.g. breakdowns, punctures;Plant and equipment, e.g. breakdowns, punctures; Personnel, e.g. carelessness, lack of training, poor Personnel, e.g. carelessness, lack of training, poor

workmanship, sickness;workmanship, sickness; Design, e.g. mistakes that ‘get on to’ the Design, e.g. mistakes that ‘get on to’ the

construction site;construction site; Management, e.g. lack of planning, errors, poor Management, e.g. lack of planning, errors, poor

organization;organization; Suppliers (including subcontractors), e.g. poor Suppliers (including subcontractors), e.g. poor

selection, errors and mistakes;selection, errors and mistakes; Force majeureForce majeure, e.g. third parties, weather, ground , e.g. third parties, weather, ground

conditions conditions

Applying the Quality Cost Applying the Quality Cost Concept (1)Concept (1)

It is difficult to measure quality costs It is difficult to measure quality costs without the implementation of an without the implementation of an effective quality cost tracking system. effective quality cost tracking system.

Among the prevention, appraisal and Among the prevention, appraisal and failure costs, failure cost is the most failure costs, failure cost is the most difficult to identify and collect. difficult to identify and collect.

Failure costs, in particular, should be Failure costs, in particular, should be prioritized for improvement through prioritized for improvement through reduction in cost of nonconformance. reduction in cost of nonconformance.

Applying the Quality Cost Applying the Quality Cost Concept (2)Concept (2)

Failure costs, in particular, should be Failure costs, in particular, should be prioritized for improvement through prioritized for improvement through reduction in cost of nonconformance.reduction in cost of nonconformance.

One difficulty in costing the failures One difficulty in costing the failures lay in estimating the cost of delays to lay in estimating the cost of delays to the construction process. the construction process.

Anticipated OutcomesAnticipated Outcomes A carefully constructed PAF model combined A carefully constructed PAF model combined

with a view of production as a process with a view of production as a process An understanding of the causes of quality An understanding of the causes of quality

problems through causal analysis.problems through causal analysis. An absolute figure for failures against which An absolute figure for failures against which

future projects could be compared, allowing future projects could be compared, allowing measurement of the effects of learning, policy measurement of the effects of learning, policy changes and continuous improvement changes and continuous improvement initiatives.initiatives.

The effect of encouraging a cultural change The effect of encouraging a cultural change among those who participate in the exercise.among those who participate in the exercise.

Recommendations for Recommendations for Future ResearchFuture Research

Further work on creating and testing Further work on creating and testing cost models is recommended for the cost models is recommended for the near future.near future.

Special emphasis should be placed Special emphasis should be placed on the constructability of the project, on the constructability of the project, so as to minimize design changes so as to minimize design changes and errors that may arise during and errors that may arise during construction construction

Recommended Quality Recommended Quality Management Practices Management Practices

The requirements of the client and end-usersThe requirements of the client and end-users Producing correct and complete drawings Producing correct and complete drawings

and specificationand specification Coordinating and checking design Coordinating and checking design

documentation.documentation. Conducting design verification through Conducting design verification through

design analysis reviewsdesign analysis reviews Controlling changes (e.g. scope freezing);Controlling changes (e.g. scope freezing); Committing to providing a quality service. Committing to providing a quality service.

Thank YouThank You

Questions ? Questions ?