A study on costs of quality in building projects

Abstract

The knowledge of quality costs makes the difference between costly way and beneficial way in achieving quality. These include costs associated with the achievement or non achievement of product quality as defined by requirements established by the company and it's contracts with customers and the society. Such quality costs are made up of three components namely prevention, appraisal and failure costs. Prevention cost is the cost of any action taken to prevent the risk of defects. Appraisal costs incorporate costs of evaluating the achievement of quality requirements such as inspection and testing performed at any stage. Losses associated with nonconformity/defects will accumulate as failures that detected during the process through inspections (internal failures such as rework) or once the client has accepted (external failures such as claims and replacements). Economic logic of above quality cost categories is to allow minimal quality cost applicable to each company by constructing a self correction quality cost system which will seek optimum cost for any business situation. Literature shows that quality costs make up 8-15% of total construction costs and most contractors can cut 25% of costs of buildings from a good quality cost management program. Hence, the problems of quality and related costs has been of a major concern to any building contractor running on a restricted budget. And it applies to clients/developers and society as large as much it does to builders. The research reviews the use and significance of issues of cost of quality in construction and concludes with a precise of a survey done on the usage in actual practice to get the perception of the industry on quality costing. It is aimed to device an appropriate strategy to improve the quality of strategic decision making as well as with regard to quality cost management in an uncertain and risky environment in firms. A simplified model (COQQS) is developed to assess the costs of quality that is incorporated in a software tool called "contractor's guide ". The proposed model (COQQS) consisted of an improvement made to the Quality Cost Matrix for quantification and handling based on the Quality Cost Model and reviews done by Abdul Rahman (1997). In Case Study-I, the contractor had incurred nearly Rs.125Million as the quality and related costs that contributed 17.66% to the actual work done. Out of total quality costs failure costs represents nearly 90 % whilst weight given to prevention/appraisals is 10 %. Prevention has got the least priority (less than 3%) of the costs expended for the project. The highest frequency of quality failure against the type of associated cause was for design • rl) related issues. Similarly communication problems, planning and coordination, subcontractor related, construction, material/plant/labour related issues, client interventions and third party/othercauses had accounted for high frequency of occurrences respectively as the causes of quality losses. The cost effect on above was analyzed in a pareto diagram, giving the direction to which areas to consider most in terms of both cost effect and frequency of occurrence.In conclusion, it suggested that an increase on prevention activity would make thesecosts minimized, thereby achieving an optimum level in efficiency and effectiveness of operations. In that regard, the need for a structured and formal system of quality cost management to address the aspects of performance has arisen as a direct result of deficiencies and problems in design, construction, materials, workmanship, cost and time overruns. Thesimilar conclusions were made in Case Study -2 which involved construction of a power stationthat incurred Rs 28 million as mere quality losses comprising 13 % contract sum of Rs 54 Million ( for the reference period of 6 months) as quality costs consisting 99% cost on qualitylosses and less than 1% on prevention and appraisals quality costs. This represented a 50.4%cost on quality failures and related costs making a 33.54 % contribution of total cost occurredon project to the contractor so far during the study period. According to the pareto chart, both projects had a significant contribution of quality costs due to design and constructionrelated issues. The simplicity that was enough to validate the significance and consequences of quality costing is a key feature of these cases. This would unveil the gap of the absence of quality related cost data in Sri Lankan construction sector to a certain extent. Specially the failure cost, which is avoidable is researched further to identify steps to be taken to tackle problems offailure and other quality costs The possibility of application in Sri Lankan context as a tool is highlighted from key findingsmade on the survey. The feedback of a questionnaire survey and interviews were used to get an idea on Sri Lankan construction industry, conceptual application, opportunities, constraints and obstacles over the suggested system for "quality cost quantificationand collection". A system was proposed to trace the position of a company in the process of development of quality system in terms of both quality management and qualitycost management. Accordingly, the survey on the adoption process for a case study finnrevealed that the firm was still in the initial stage of development of quality management systemusing tools of quality costing. Further, several applications of the model and future workahead are identified to present conclusions and recommendations.