The true cost of bad quality

Andrew Holt, CQI Technical Content Executive, interviews Daniel Keeling as he embarks on a major project and report to measure the cost of quality in the construction industry.

Only a handful of studies on the implementation of cost of quality in the construction industry have ever been undertaken. However there is no data worldwide to cover the total cost of quality in the end product, according to Daniel Keeling, Chair of the CQI Cost of Quality Working Group, which is a supporting group of the CQI Construction Special Interest Group.

The group therefore undertook the challenge to fill this gaping void. The aim of the report is to quantify the cost of poor quality and to develop measures to reduce failures and so reduce operational costs. “We have looked at the whole aspect of the cost of quality. One could say it is the cost of non-quality,” says Keeling. “It is about the failure to deliver what the client actually wanted.”

But this is not as easy as it initially sounds. “This failure comes in various forms a failure to: fully specify a project, to understand what is wanted or to give the correct direction to the contractor, all leading to a failure to meet the requirements of the customer.”

Keeling says: “There is very little analysis done on costs and failure, yet you are talking projects that are big money. The UK construction industry is worth £100Bn each year, and if you take just a conservative estimate of 1-2% as a failure cost, you are talking of around £1Bn to £2Bn in the UK.” An American study has found that 5-6% can be lost on defects.

The CQI group has been working for 18 months and has representatives from all sides of the industry, from clients, consultants and contractors. To begin the research, an accepted model of measurement would have to be agreed and implemented. Keeling explains: “We had to break it down and make it measurable. We decided to focus our efforts on the costs of not delivering client requirements post-handover. The cost of quality after handover is broken down in all types of paths. We will measure all these individual paths. We have therefore come up with a structure, suitable definitions and measurement.”

To take the project forward, a relationship has been struck-up with University College London (UCL) and its construction research department. UCL Bartlett School of Construction and Project Management will be undertaking a mixed method research study. It is hoped that this work will contribute to the development of a new integration model that could support a reduction in operational failures.

The study will be three years in the making. Keeling enthuses about the final report and its appeal. “We think this will be of phenomenal interest to clients worldwide: a comprehensive report which can benefit all construction clients across the world.”

Challenges and opportunities

Keeling confesses there are challenges ahead: “Organisations are not always giving us the information we need, as they are protecting their commercial interests. Insurance has also been more difficult than anticipated in the measurement of cost. Their models are difficult to get hold of and it is difficult to measure how they come up with a number relating to costs.”

Nevertheless, this report and undertaking has also led to other interest for future projects, with thought being given to a second report being undertaken due to the scale of the whole project.

Keeling’s experience in the field of construction and quality is mightily impressive, spanning 35 years. He began as a Senior Engineer in the Yanbu Industrial City in Saudi Arabia in the early 1980s when its population was 500. It is now over 200,000.

Reflecting on this time, Keeling considers how quality has changed, or at least its perception. “In Yanbu, quality and assurance sat together, reporting directly to the director general. I had the power to disqualify any supplier. I had to approve every supplier and monitor them thoroughly. Since then, my power has come through being persuasive. It appears the power of the quality manager is not as great as it was then.”

Other factors have come into play to shift the position of quality. “I would say safety is climbing up the commercial tree in importance and quality is slightly drifting down the tree.” But, Keeling notes: “If you don’t have quality you don’t have safety: quality is all-encompassing.”

Learning lessons

Since his time in Saudi Arabia, Keeling has worked on, and been responsible for, the quality systems involved in the building of the Channel Tunnel and then as Head of Quality for HS1 during design construction testing and the first phase of operations when the trains began running.

He moved over to Crossrail before settling into his current role as Director of his own quality consultancy firm, Dankeel Associates. “The construction industry doesn’t learn lessons as quickly as it should,” Keeling says, suggesting challenging times ahead.

So what is his biggest lesson learned? “You need to be technically able and focused enough to be able to influence the industry. You have to see the big picture. Focusing solely on inspection is not right. Focusing solely on processes is not right. You have to see the big picture and ask: what is the end product and what does it look like?”

And, as work begins in earnest on the cost of quality report, Keeling’s final advice for everyone in quality: “Be proud in what you do and stand up for what you believe in.”

 

 

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