Construction Project Management Portal

Reducing Your Cost of Quality


How high is your cost of quality? The answer might surprise you. Yes, it includes reviews, the QA infrastructure, and preparing tests, those are your ‘Appraisal Costs’. But how high are your ‘Failure Costs’ the cost of defects?

Your engineers spend time in diagnosis and rework, development schedules slip, support costs climb, and your company’s and products’ reputations sink. These failure costs, which are the more significant cost of quality, are beyond your direct control. But you can gain control over them indirectly, by investing in appraisal costs that minimise failure costs, reducing your total cost of quality and making it more predictable.

Cost of Quality: Appraisal vs. Failure Costs

The cost of quality is a significant cost on any project, so prudent managers look for ways to keep those costs in check. The quality costs we can control are things like performing reviews, preparing tests, and maintaining our QA infrastructure; appraisal costs. But there are also the quality costs we cannot control.

Failure costs are the ones that happen to us. We incur these ‘Costs of Poor Quality’ every time a defect comes to light, both during testing and after release. Failure costs take many forms:

  • The effort that our developers spend investigating and diagnosing defects, and then reworking designs and code to correct them.
  • Slips in our schedules, as testing uncovers defects that require rework and re-testing.
  • Our customer support costs, most of which are for helping customers to deal with all of the defects we shipped to them, while developers spend even more time in investigation and rework.
  • But, the biggest failure costs are nearly impossible to quantify; loss of customer good will, tarnished reputation in the market, and loss of product momentum.

Since some components of the cost of quality are under our direct control and others are not, it seems to make sense to reduce those costs that we can, and hope for the best with those that we cannot control. Unfortunately, a focus on reducing appraisal costs can increase our total cost of quality, because it is likely to result in an even larger increase in failure costs.

As reported consistently in our industry, failure costs rise exponentially as the project progresses. Reducing appraisal activities delays the detection of defects, ensuring that they are much more expensive to address when they are detected.

Leveraging Appraisal to Reduce Failure Costs

Most organisations depend upon the compiler and various types of testing to remove most or all of the defects from their products. But as we can see from Figure 1, these are not the most effective methods of removing defects. They each tend to detect no more than 50% of the defects in the product, and often do much worse than that. In addition, they happen late in the project lifecycle, when defects are the most expensive to fix. These activities are classified as ‘Failure Cost of Quality’ because the vast majority of the time is spent dealing with failures.

Figure 1: Appraisal vs. Failure Activities.
Activity Cost of Quality Effectiveness
Structured Personal Reviews Appraisal ———–
(Fagan) Software Inspections Appraisal ———-
Informal Peer Review Appraisal ———
Compiling Failure ——–
Unit Testing Failure ——-
Integration Failure ——
Beta Testing Failure —–
System Testing (and performance & other testing) Failure —-
Acceptance Testing Failure
Walkthroughs Appraisal

Contrast this with the various kinds of reviews and inspections. They are relatively more effective, not only because they can detect 60 to 80% of the defects in the product, but also because those defects are detected earlier, when they cost much less to correct. They are classified as ‘Appraisal Cost of Quality’ because only a small proportion of the time is spent responding to failures. So appraisal activities tend to remove many more defects for each engineer-hour spent than do the failure activities.


May 26, 2012 - Posted by | Project Management |

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