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Cost of quality versus cost of non-quality in construction: the crucial balance

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  • Yehiel Rosenfeld

Abstract

The research is a pioneering attempt to determine the optimal level of investment in quality by construction companies. The methodology is based on quantifying the four types of quality-related costs in residential construction, and relates them to each other by expressing them all as percentages of the relevant total construction revenues (revenues to the company due to construction, excluding land, etc.). The findings reaffirm, on the one hand, that investing in quality is a worthy strategy and that, in the situations examined, the ratio of the direct benefits to the investment (in terms of savings on internal and external failures) is at least 2:1. On the other hand, the findings also show that an excess of quality costs (prevention and appraisal) is wasteful. Above a certain level of investment, the extra benefits are marginal, and thus do not offset the extra costs. Statistically fitted graphs, based on actual quantitative data, support this hypothesis, and provide approximate boundaries of effective versus ineffective investments in quality. In this study, the optimal range lies between 2% and 4% of the company's revenue. Investing less than 2% in prevention and appraisal will definitely entail higher failure costs, whereas an investment of over 4% most probably will not pay itself back.

Suggested Citation

  • Yehiel Rosenfeld, 2009. "Cost of quality versus cost of non-quality in construction: the crucial balance," Construction Management and Economics, Taylor & Francis Journals, vol. 27(2), pages 107-117.
    • Handle: RePEc:taf:conmgt:v:27:y:2009:i:2:p:107-117
    DOI: 10.1080/01446190802651744
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    References listed on IDEAS

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    1. Peter Love & Heng Li, 2000. "Quantifying the causes and costs of rework in construction," Construction Management and Economics, Taylor & Francis Journals, vol. 18(4), pages 479-490.
    2. Raymond Aoieong & S. L. Tang & Syed Ahmed, 2002. "A process approach in measuring quality costs of construction projects: model development," Construction Management and Economics, Taylor & Francis Journals, vol. 20(2), pages 179-192.
    3. P. E. D. Love & P. Mandal & H. Li, 1999. "Determining the causal structure of rework influences in construction," Construction Management and Economics, Taylor & Francis Journals, vol. 17(4), pages 505-517.
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    4. Ileana – Sorina Rakos, 2021. "Cost Management Regarding S.C. Adarco Invest S.R.L. Petroșani," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1110-1119, December.
    5. Ooi, Joseph T.L. & Le, Thao T.T. & Lee, Nai-Jia, 2014. "The impact of construction quality on house prices," Journal of Housing Economics, Elsevier, vol. 26(C), pages 126-138.
    6. Olanrewaju Abdul Lateef & Lee Alice Hui Jing, 2022. "Investigation of the poor-quality practices on building construction sites in Malaysia," Organization, Technology and Management in Construction, Sciendo, vol. 14(1), pages 2583-2600, January.

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