IDEAS home Printed from
   My bibliography  Save this article

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


  • Yehiel Rosenfeld


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

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Bajari, Patrick & Tadelis, Steven, 2001. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 387-407, Autumn.
    2. Parkhe, Arvind, 1998. "Building trust in international alliances," Journal of World Business, Elsevier, vol. 33(4), pages 417-437, January.
    3. Sai-On Cheung & Tsun-Ip Lam & Mei-Yung Leung & Yue-Wang Wan, 2001. "An analytical hierarchy process based procurement selection method," Construction Management and Economics, Taylor & Francis Journals, vol. 19(4), pages 427-437.
    4. Roberto Pietroforte, 1997. "Communication and governance in the building process," Construction Management and Economics, Taylor & Francis Journals, vol. 15(1), pages 71-82.
    5. Anna Dubois & Lars-Erik Gadde, 2002. "The construction industry as a loosely coupled system: implications for productivity and innovation," Construction Management and Economics, Taylor & Francis Journals, vol. 20(7), pages 621-631.
    6. Barlow, James, 2000. "Innovation and learning in complex offshore construction projects," Research Policy, Elsevier, vol. 29(7-8), pages 973-989, August.
    7. Albert Chan & Daniel Chan & Kathy Ho, 2003. "An empirical study of the benefits of construction partnering in Hong Kong," Construction Management and Economics, Taylor & Francis Journals, vol. 21(5), pages 523-533.
    8. M. Motiar Rahman & Mohan Kumaraswamy, 2002. "Joint risk management through transactionally efficient relational contracting," Construction Management and Economics, Taylor & Francis Journals, vol. 20(1), pages 45-54.
    9. Spekman, Robert E., 1988. "Strategic supplier selection: Understanding long-term buyer relationships," Business Horizons, Elsevier, vol. 31(4), pages 75-81.
    10. J Michael Geringer, 1991. "Strategic Determinants of Partner Selection Criteria in International Joint Ventures," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 22(1), pages 41-62, March.
    11. Per Erik Eriksson, 2006. "Procurement and Governance Management ? Development of a Conceptual Procurement Model Based on Different Types of Control," management revue. Socio-economic Studies, Rainer Hampp Verlag, vol. 17(1), pages 30-49.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. 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.
    2. repec:gam:jsusta:v:9:y:2017:i:6:p:1007-:d:101138 is not listed on IDEAS

    More about this item


    Quality; cost of quality; quality assurance;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:conmgt:v:27:y:2009:i:2:p:107-117. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.