EVALUATING THE COST OF POOR QUALITY: A CASE STUDY

Eng.Mahmoud Hammam (1), Prof.Dr.Refaat Abdel-Razek (2)

ABSTRACT
In the cycle of never ending improvement, quality measurement plays an important role.
The measurement is considered as a trigger for the improvement .No improvement could be
achieved if no measurement is applied and analyzed in order to assist in identifying
opportunities for improvement. The objective of this paper is to develop and apply a
technique to measure the quality of construction projects during one of the construction
stages. The chosen construction stage herein is deep foundation, piling stage. The proposed
applied technique has been termed the “Poor Quality Cost Measurement (PQCM)”. This
technique is based mainly on calculating the lost cost incurred as a result of poor quality.
The cost of poor quality includes all losses occurring during construction. These include:
cost due to unutilized times of equipment and labor, cost due to reduction of construction
rate of production – compared with the expected or estimated rate –, and the cost of rework
or unapproved works. The technique is applied in a large project in Egypt, 6th October
Bridge, Al Demerdash Zone, Cairo .The collection and analysis of data are explained, and
the results of the application and the calculations are reported. The developed technique
provides an easy to use tool which helps identify ways to improve the work processes and
reduces the overall cost of quality, and hence the cost of the project. Since the cost of poor
quality is estimated to be a considerable amount of the project cost, significant saved cost
would be available on future projects.

Keywords: Construction, Quality, Improvement, Measurement, Piling.

(1) Head of Contracts Department, Bauer Egypt, Specialized Foundation Contractor, Cairo, Egypt.

(2) Professor of Construction Management and Head of the Department of Construction Engineering, Faculty of
Engineering, Zagazig University, Egypt.
INTRODUCTION
As the continuous quality improvement became the most important strategy, quantitative
techniques accordingly became necessary to measure, monitor, and assess the quality of the
operations. The main concept of Total Quality Management (TQM) is ‘never ending
improvement’ which could not be achieved without measurement (Deming 1986). Shepherd
and Helms (1995) stated that “you won’t be able to manage what you can not measure and,
in case of no measurement techniques, there will be no possibility of quality improvement”.
Measurement is the trigger for improvement (Osman and Abdel-Razek 1996). Measurement
is considered as an effective tool for guiding an organization; if it will be correctly used, but
if not it may be destructive (Harrington 1995). Measurements are needed to forecast and
control those important variables to the success of a construction project (Steven 1996).
Abdel-Razek (1998b) stated that “problems surrounding perception, interpretation and
assessment of quality resulted from the shortage of measurement”. Abdel Razek (1998a)
concluded 16 factors for quality improvement in the Egyptian construction industry, and
emphasized the importance of quality measurement.
Davis (1987) developed a quality management tool based on measuring cost of quality in
design and construction. This tool, which is called the Quality Performed Tracking System
(QPTS), was designed to be able to evaluate design and construction quality performance in
term of costs. The Construction Industry Institute (CII) developed a Quality Performance
Management System (QPMS), which was mainly based on the QPTS (CII 1989). The
objective of QPMS is to categorize and measure quality related cost involved in the design
and construction of engineering projects. The QPMS was followed by a blueprint for
implementation in 1990. In 1990, (CII) commissioned two task forces:
The Total Quality Management Task Force (TQMTF) whose area of interest was primarily
the company; and the Quality Performance Measurement Task Force (QPMTF), whose area
of interest was the engineer-procure construct (EPC) project. The first phase produced is the
Quality–Measurement Matrix (Steven et al. 1994). A developed prototype methodology
called “the blueprint “to assist companies in measuring quality performance on EPC projects
(Steven 1996). Quality– Measurement Matrix focused on four TQM elements: customer
focus, leadership, delivery, and employee empowerment. The European Construction
Institute (ECI 1993) developed a model for measuring Total Quality Management progress.
However the model was tended to measure Total Quality Culture and it do not offer a clear
and simple to use method to measure the quality of execution on construction sites.
Abdel-Razek, El-Dessouki, and Soliman (2000) developed and applied a model capable of
measuring the quality of construction projects. This model, though applicable but it is not
based on calculating the actual cost of poor quality.
The construction phase is considered as the most important phase because all parties and
resources are involved. Also, construction phase is an intermediate stage. Output of pre-
construction stages has a significant effect on quality in construction stage, as the outputs of
construction stage have a serious effect on quality in post construction stage. Also, the
construction stage is usually the most expensive, intensive and difficult stage of the project
stages .The remedial cost due to poor quality in construction stage –if applied-would cause
the greatest cost. Figure (1) illustrates the effect, in money terms, of poor quality in the
different stages of the project. It shows that the highest cost of poor quality occurs in the
construction stage. Therefore, measuring quality in the construction phases is very
important and represents the project quality.

Fig. (1) Effect-Money Wise- of Poor Quality in the Project Stages

The objective of this paper is to explain a method that is capable of measuring the cost of poor
quality in the construction phase of a project. It also explains the application of this method on
one of the largest and most important projects in Cairo.

OBJECTIVES

The main objectives of this research were:

a) Develop a method to measure the quality of execution during the construction phase.
b) Apply the method on one stage of the construction phase – the deep foundation stage.
c) Analyze the results and draw –up conclusions.

THE PROPOSED MODEL

a) Cost Breakdown
In any construction project, the cost and price of the project could be broken down into eight
elements (Abdel-Razek 1992), as shown in fig. (2) .These elements are: cost of labor, cost of
equipment, cost of material, cost of subcontractors, site overheads, general overheads, risk,
and profit.
• The summation of the first four items is known as Direct Cost.
 • Site overheads include: site installation, temporary works, site cost, such as offices,
telephones, electricity, canteen, accommodation, watchmen, supervision, etc.
• The summation of direct cost and site overheads is known as Construction Cost.
• The summation of the last three items is known as Markup.
• Finally, the summation of Construction Cost and Markup gives the project price.

Labor cost

Construction cost
Direct cost

Price of Tender
Malarial cost

Equipment cost

Sub-contractors cost

Site Overheads

Mark up

Fig (2) Price and Cost Breakdown for Construction Projects (Abdel-Razek 1992)

b) Cost of Poor Quality

This technique is based mainly on calculating the lost cost incurred as a result of poor quality.
The cost of poor quality includes all losses occurring during construction. These include: cost
due to unutilized times of equipment and labor, cost due to reduction of construction rate of
production – compared with the expected or estimated rate –, and the cost of rework or
unapproved works. Three forms of tables were designed to collect the data needed. For each
table, simple equations were derived to measure the cost of poor quality, as follows:
a. Table (1)
The first table, table (1), shows the planned and actual production rate on a daily
basis. The production rate – planned and actual – are weekly collected
b.Table (2)
The second table, table (2), shows the total weekly value of work – planned and
actual – on a basis of unit price in Egyptian pound (L.E) and the weekly production
rates ,planned and actual, which are obtained from table (1). Also causes of delays of
production rates are collected in this table.
c. Table (3)
The third table, table (3), shows actual weekly lost cost resulted from poor quality.
 Table ( 01) Planned & Actual Production Rate VS Time in Days

Drilling Time
Daily Production{L.m} {Hrs } Casting Time {Hrs}
Date Planned Actual Planned Actual Planned Actual

Total 6 Days. X Y
Losses Factor
S= 1-{Y/X] %

Table( 02) Total Production Value Per Week {L.E.}

Actual Planned Differ. Reasons in Details & Notes

Production per Week
{L.m} Y X X-Y
Unit Price { L.E.} P

Total Weekly Y*P X*P {X-Y}*P

Income/Losses { L.E.}

* Losses Factor S ={Weekly Planned Production - Weekly Actual Production}

X100 / Weekly planned Production

Table(03) Actual Weekly Lost Cost Due to Poor Quality { L.E. }

Losses
Factor Modified Losses % of
Item Losses Per Week {S} this Week** losses Remarks
Wages S
Equipment Cost S
Lost Material 1.00
Quality Cost 1.00
Head Office O.H {X-Y}*P 0.05
Total Lost Cost this week { L.E. }
Lost Cost / Actual income this Week
Modified Losses per Week for each item** = S {Losses factor } x Actual Cost per week for the item
Losses Factor { S } = 1.0 for lost material , and quality cost {Quality Staff Cost}
= 0.05 for Head Office Overheads regarding the lost income this week
= S {from table # 01} for remaining items
 APPLICATION: 6th of October Bridge
a) The Project
th
6 of October Bridge is the most important bridge in Cairo, it connects the far east of town by
down town and Giza. The project had started at the seventy of the last century at segments .The
first segment, at the mid of seventieth, was a body crossing the Nile, and until 1995, the bridge
had ended at Ghamra downward before a newest segment started. The newest segment is
extended from Ghamra to Al Nasr Way (Auto-Run Way) in Nasr City.
A studied part is the part, which connected Ghamra part and Ain Shams university part crossing
railway, underground metro and metro lines.
b) Project Description

¾ Project Name : 6th October Bridge

¾ Location: Al Demerdash Zone, Cairo.
¾ Client : Cairo Governorate.
¾ Designer and Consultant: Moharam Pakhom Consultant Office.
¾ Contractors: The project was awarded to “Arab Contractors Company“ as the main
contractor.
¾ Project Cost
The total cost of project could not be calculated, until its completion, because the project
had been awarded to the main contractor as a “Cost Plus “ Contract type.

c) Scope of application and Method of Construction

The case that is investigated in this study is the bridge extended along Eshak tawfik street,
Demerdash, Cairo, and for deep foundation stage. About 400 nos. of cast in situ piles with
variable depth according to boreholes. The piles diameter was 1500 mm, with full length
reinforcement.
The Value of the studied scope of work is over 4.6 million Egyptian Pound. This scope of work,
piling work, was awarded to Specialized Foundation Contractor, Bauer Egypt.

d) Data Collection & Analysis

The data were collected, by using tables 1,2&3,. The analysis of these data was carried out by
using the following figures:-
Figures (3) shows the actual income value and poor quality cost for each week of the total
project duration of 26 weeks.

Figure (4) illustrates the percentage of poor quality cost – losses due to poor quality – as a
percentage of the actual income – on weekly basis –. Figure (4) shows that the weekly poor
quality cost have a wide variation, from 2.4% to 28.7% of the actual weekly income. It also
indicates that the total cost resulted from poor quality is 14.7 % of the total actual income.
The biggest weekly amount of poor quality cost, L.E 40833, is in week number 20, and it was
resulted basically from low production rate during the week, where the biggest weekly rate of
poor quality cost in relation to actual weekly income is 31.7 %.
 300000

250000

200000
Amount { LE }

150000

100000

50000

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
Duration { We e k }
Income {L.E} Fig (3) Income & Quality Cost
Poor Q uality C ost { L.E } (6th of October Bridge,Demerdash,Cairo)

35.0
Quality Cost as a %(ge) of Income

30.0

25.0

20.0

15.0

10.0

5.0

0.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
Duration { Week }

Fig (4) Poor Quality Cost as %ge of Income

(6th of October Bridge , Demerdash , cairo)

The cost of poor quality was broken-down into the following cost elements: - Wages,
equipment, material, head office overheads, and quality crew cost.
Figure (5) shows the losses for each cost item. It shows that the losses for wages is 12.85%,
for equipment is 61.21%, for material is 0.05%, for quality crew cost is 11.01%, and for head
office overhead is 14.88%. It is shown that the biggest losses were for equipment cost,
61.21% of the total poor quality cost. On the other hand the smallest losses were for lost
material, 0.05% of the total poor quality cost. The heavy equipment in piling works usually
represents the major cost item, while due to the traditionally scope of work, the lost material
and/or rework cost could be minimized.

He ad O ffi ce W age s
O ve rh e ad 12.85%
14.88%

Q u al i ty C re w C ost
11.01%

Mate ri al W astage
0.05%

Equ i pm e n t C ost
61.21%

Fig (5) Losses Break down as %ge of total losses

(6th of October Bridge , Demerdash,cairo)

Figure (6) shows the financial losses and actual income for each month of project period and
total value for each. Average values - on monthly basis – are then calculated. Also, the poor
quality cost – losses due to poor quality– as a percentage of actual income is calculated, on
monthly basis, and the average is calculated. The analysis of the data showed that the
monthly poor quality cost is averaged from 7.39% to 20.1% of the actual monthly income. It
also showed that the total cost resulted from poor quality represents 14.7 % of the total actual
income. The biggest monthly amount of poor quality cost L.E 144550 is lying in the forth
month, but the biggest monthly rate of poor quality cost versus actual monthly income,
20.1%, is lying in the last month (#6).

1,200,000

1,000,000
Value {L.E}

800,000

600,000

400,000

200,000

-
0 1 2 3 4 5 6 7

Month

Income {L.E} Fig (6) Monthly Income & Poor Quality cost
Poor Quality Cost (6th of October Bridge , Demerdash , cairo)
Figure (7) shows the value of poor quality cost – on monthly basis – as a percentage of actual
income along total project period. It shows an expected reduction of poor quality cost along first
three months, and up normal increasing to the end of project. These increasing could be attributed
to the bad site condition.
Figure (8), shows the cumulative poor quality cost –on monthly basis-as a percentage of the total
poor quality cost.

25.00
Quality Cost as a (%ge) of Income

20.00

15.00

10.00

5.00

-
1 2 3 4 5 6
Duration { month }

Fig (7) Monthly Quality Cost Diagramme

(6th of October Bridge ,Demerdash,Cairo)

100.00
90.00
Poor Quality Cost as a %ge

80.00
70.00
of Income

60.00
50.00
40.00
30.00
20.00
10.00
0.00
1 2 3 4 5 6
Duration { month }

Fig (8) Cumulative Monthly Poor Quality Cost as %ge of total Poor
Quality Cost
(6th of October Bridge,Demerdash,Cairo)
Figures (9) shows the weekly poor quality cost, regarding each cost element, during the
project duration as a percentage of the total weekly poor quality cost.
Cost as a %ge of Weekly Poor Quality

100.0

80.0

60.0
Cost

40.0

20.0

0.0
1 3 5 7 9 11 13 15 17 19 21 23 25
Duration {week}

Fig (9) Weekly Cost as a % ge of Total Weekly Poor

Quality Cost
(6th of October Bridge,Demerdash,Cairo)

wages equipment material Q.Crew H.office O.H

 RESULTS

The analysis of the results showed the following:

i. The total cost of poor quality was L.E. 703,689 for the piling operation, which represents
14.7% of the actual project income.

ii. The range of weekly losses due to poor quality was from 2.4% to 28.7% of the actual weekly
income. The average weekly loss due to poor quality was LE 27,065, which represents 14.7% of
the average actual weekly income.

iii. The range of monthly losses due to poor quality was from 7.39% to 20.10% of the actual
monthly income. The average monthly loss due to poor quality was LE 117,281, which represents
14.7% of the average actual monthly income.

iv. The cost of poor quality was broken down to show the lost cost caused by: labor, equipment,
material, quality crew, and head office overheads. Figure (9) shows the weekly poor quality cost,
regarding each cost element, during the project duration as a percentage of the total weekly poor
quality cost. Figure (5) shows the contribution of all the items together as a percentage of the total
cost of poor quality. Equipment lost cost represents the highest losses rate 61.21% of total cost of
poor quality, and cost of lost material and rework cost is shown as the smallest losses rate 0.05%
of the total cost of poor quality.

Causes of Poor Quality

The causes of poor quality over the 26 weeks could be summarized in the followings :-
i. Non expected soil characteristic
During tendering stage, the boreholes, which have been conducted under the client
supervision, were only available soil data. Therefore, the estimation of price and production
rate were done based on the mentioned data. Also in contract there was no any precaution
to protect the contractor in case of such data changing.
During construction stage, a considerable change in soil criterion was arisen. Drilling process
showed high strength strata, and it led to production rate decreasing as well as frequent
idle of drilling rig.

ii. Utilities existing along the site

The removal of utilities and site preparation- which are main contractor task - caused a
considerable decreasing in production rate. This is because of delaying in utilities removal
due to the high difficulty of getting the permits for traffic stopping and utilities removal.
The delaying in utilities removal led to a problem of limited work place { only one
available foot } and poor maneuvering which automatically led to decrease of production
rate.

In general , it could be summarized as no accurate data for soil character were available
during tendering stage as well as no accurate data for utilities location/quantities during
Pre-construction Stage .
 CONCLUSIONS
1) A model was developed to measure the cost of poor quality on construction projects. The
developed model provides an easy to use tool which helps identify ways to improve the work
processes and reduces the overall cost of quality, and hence the cost of the project .
2) A large construction project-6th of October Bridge, Demerdash, Cairo- was selected for the
application of the developed model. The application was carried out on a part of the construction
phases of the project, the deep foundation (piling stage). The deep foundation work, piling work,
in the project was executed by a specialized contractor, Bauer Egypt.
3) The applications of the model showed that :
a) The total cost of poor quality was L.E. 703,689 for the piling operation, which
represents 14.7% of the actual project income.

b) The range of weekly losses due to poor quality was from 2.4 % to 28.7 % of the actual
weekly income. The average weekly loss due to poor quality was LE 27065, which
represents 14.7% of the average actual weekly income.

c) The range of monthly losses due to poor quality was from 7.39% to 20.10% of the
actual monthly income. The average monthly losses due to poor quality was LE 117281,
which represents 14.7 % of the average actual monthly income .

4) The cost of poor quality was broken down to show the lost cost caused by: labor, equipment,
material, quality crew, and head office overheads. These were as follows: wages 12.85%,
equipment 61.21%, material and rework 0.05%, quality crew cost 11.01%, and head office
overhead 14.88% respectively. Equipment lost cost represented the highest losses rate with
61.21% of total cost of poor quality, and cost of lost material and rework cost was the smallest
losses rate with 0.05% of the total cost of poor quality.

5) The Causes of poor quality over the 26 weeks were mainly: non expected soil characteristic
and the difficulties which resulted from unexpected presence of a lot of under ground utilities
through the location of piles.

ACKNOWLEDGEMENTS
The writers would like to thank Bauer Egypt, and its top management, for their valuable support.
The writers would also like to thank all the company managers who participated in this study.
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