Cost of Quality Evaluation in Mass-Housing

Projects in Developing Countries

Gholamreza Heravi, M.ASCE 1; and Amirhosein Jafari, S.M.ASCE 2
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Abstract: In the construction industry, one of the most important concerns of organizations is how to achieve a balance between the desired
level of quality and the expenses associated with it. The evaluating of the cost of quality (COQ) can help achieve this balance. This study
surveys quality-related activities and costs in mass-housing projects in Iran by conducting 77 structured interviews on 60 mass-housing
projects. The survey uses the prevention-appraisal-failure (P-A-F) model, which is the most widely used model for determining and clas-
sifying COQ, as the main framework. This research first specifies the most common quality-related activities and components of quality costs.
It also develops a model for evaluating the total COQ of the studied projects by fitting third-order polynomial trend lines to the compiled data.
Then, the research evaluates potential cost savings as a possible result of quality-management approach to the optimum level of COQ on the
basis of the developed model. This study contributes to the project’s quality management by introducing a new model for evaluating the COQ
and its optimum level in mass-housing projects. The model evaluates the potential savings in quality costs as a result of achieving the
optimum level of COQ. DOI: 10.1061/(ASCE)CO.1943-7862.0000837. © 2014 American Society of Civil Engineers.
Author keywords: Cost of quality; Construction projects; Quality-related activities; Mass-housing projects; Developing countries; Cost
and Schedule.

Introduction and resources are wasted each year because of inefficient or

The construction industry in the developing country of Iran has
been booming in recent years because of extensive mass-housing
programs. To address the dearth of housing in the last decade, the
Iranian government has planned an extensive mass-housing pro-
gram to construct millions of residential units consisting of small
housing units ranging from 75 to 120 m2 . The construction of these
multistory residential buildings is concentrated in several small
sites around the country.
As a result, this push has created a competitive environment
between construction firms. One of the main concerns of involved
organizations is to keep the desired level of quality despite tough
contract terms. Abdelsalam and Gad (2009) emphasized that the
objective of a construction project is not only to meet the client’s
requirements but also to do it at the lowest possible cost. Therefore,
any serious attempt to improve quality must take into account the
associated costs (Abdelsalam and Gad 2009). To achieve a balance
between the level of quality desired and its expenses, evaluating
the cost of quality (COQ) helps organizations provide directions
to improve quality and decline quality costs. Every segment of
the construction industry can benefit from the quantitative analysis
of quality-related efforts (Davis et al. 1989; Kazaz and Birgonul
2005b). Achievement of acceptable levels of quality in the con-
struction industry has long been a problem. A lot of time, money,
1
Assistant Professor, School of Civil Engineering, College of Engineer-
ing, Univ. of Tehran, 16 Azar Ave., P.O. Box 11155-4563, Tehran, Iran
(corresponding author). E-mail: heravi@ut.ac.ir
2
Ph.D. Student, Dept. of Civil Engineering, Univ. of New Mexico, MSC01
1070, Albuquerque, NM 87131; formerly, Postgraduate Student, School of
Civil Engineering, College of Engineering, Univ. of Tehran, 16 Azar Ave.,
P.O. Box 11155-4563, Tehran, Iran. E-mail: Amir_h_jafari@ut.ac.ir
Note. This manuscript was submitted on March 6, 2013; approved on
December 31, 2013; published online on February 3, 2014. Discussion period
open until July 3, 2014; separate discussions must be submitted for individual
papers. This paper is part of the Journal of Construction Engineering and
Management, © ASCE, ISSN 0733-9364/04014004(9)/$25.00.
nonexistent quality levels, such as reworks and maintenance.
The situation is even worse in the case of mass-housing projects
for low- and middle-income groups (Kazaz and Birgonul 2005b).
The purpose of this research is to introduce a new model for
evaluating the COQ and its optimum level in mass-housing projects.
The model evaluates the potential of savings in quality costs as a
result of achieving the optimum level of COQ. This research first
specifies the most common quality-related activities and components
of quality costs. It also develops a model for evaluating the total
COQ of the studied projects by fitting third-order polynomial trend
lines to the compiled data. Then, the research evaluates potential
cost savings as a possible result of quality-management approach
to the optimum level of COQ, based on the developed model. This
study uses the prevention-appraisal-failure (P-A-F) model to survey
quality-related activities and costs in mass-housing projects in
Iran by conducting 77 structured interviews on 60 mass-housing
projects. This model may help project managers to plan quality man-
agement in mass-housing projects to reach the optimum level
of COQ.
Literature Review and Background
Quality and Related Costs
Juran and Gryna (1993) define quality as “fitness for purpose,”
whereas for Crosby (1979) it is “conformance to requirements,”
and according to Deming (1986) quality is “uniformity with respect
to a correct target.” Using the definition of quality in the construc-
tion industry as the ability to meet the requirements contracted with
clients (Kazaz et al. 2005) may result in the study of quality in
terms of its costs.
In the construction industry, increasing attention to COQ has
been given to improving the overall construction quality since
the early 1980s (Kazaz et al. 2005). As Crosby and Juran—who
were the pioneers of quality in the industry—believed, COQ

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 is defined as the primary tool for measuring quality (Aoieong
et al. 2002). Cost of quality is usually understood as the sum of
conformance and nonconformance costs, cost of conformance is
defined as the price paid for the prevention of poor quality, and
cost of nonconformance is the cost of poor quality caused by prod-
uct and service failure (Schiffauerova and Thomson 2006).
P-A-F Model
The P-A-F model is the most widely used model for determining
and classifying quality costs (Kazaz et al. 2005; Abdelsalam and
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P-A-F model to the construction projects and studied the COQ ele-
ments of a construction project in the United Kingdom (UK). They
introduced traditional COQ optimization to the construction project
and asserted that this was the first time that a complete P-A-F
methodology had been used. Kazaz et al. (2005) performed a study
to estimate quality costs according to the P-A-F model. They focused
on a mass-housing project in Turkey that included 3,100 housing
units. They also used mathematical equations to calculate the
optimum level of COQ in a construction project for the first time.
Abdelsalam and Gad (2009) studied 291 multistory residences in
United Arab Emirates (UAE) to evaluate all elements of quality costs

Gad 2009). This approach was established as the basic framework
for identifying and analyzing the COQ by British Standard Institute
(BSI) in 1992 (Barber et al. 2000).
The P-A-F model consists of prevention, appraisal, and failure
costs as three main elements. Prevention costs are associated with
actions taken to ensure that a process provides quality products and
services (Schiffauerova and Thomson 2006). These costs result
from quality activities that are used to avoid deviations and errors
(Abdelsalam and Gad 2009). Appraisal costs, as the cost of evalu-
ating the achievement of quality requirements (Porter and Rayner
1992), are associated with measuring the level of quality attained
by the process (Schiffauerova and Thomson 2006). These costs in-
clude all activities undertaken while conducting inspections, tests,
and other planned evaluations that are used to determine whether
products and/or services conform to their requirements (Johnson
1995). Failure costs, which are divided into internal and external
costs, refer to the nonachievement of requirements (Kazaz and
Birgonul 2005a), and they are incurred when it is necessary to cor-
rect products that fail to satisfy the customer’s need or do not meet
company quality specifications (Aoieong et al. 2002).
To minimize the total COQ, relationships between quality costs
components should be considered. In the P-A-F model, several re-
lationships exist between the quality costs, which are fundamental
to comprehending the model (Kazaz et al. 2005). A classic suppo-
sition of the P-A-F model is that investment in preventive and
appraisal activities will reduce failure costs because more failures
are discovered at an earlier stage (Porter and Rayner 1992; Plunkett
and Dale 1998).
Application of P-A-F Model in Construction Projects
Barber et al. (2000) studied the quality failure costs in civil engi-
neering projects. In their research, the P-A-F approach was initially
selected as the appropriate methodology for a pilot study in con-
struction projects; however, only failure costs were analyzed. As
such, Hall and Tomkins (2001) attempted to apply the complete
on the basis of the P-A-F approach. In addition, the same approach
was used to calculate the optimum level of COQ. Most recently,
Jafari and Love (2013) implemented a quality costing program on
a monorail project in Iran by using the P-A-F model.
The P-A-F model also helps categorizing quality-related
activities. Davis et al. (1989) studied activities related to quality-
management efforts and deviation categories in construction. More-
over, Kazaz et al. (2005) provided some examples of COQ
elements in construction projects, and Abdelsalam and Gad (2009)
developed a framework of quality activities for quality costing.
Previous Attempts to Measure Quality Costs
A limited number of case studies have examined quality costs in
construction and engineering projects (Jafari and Love 2013). Love
and Li (2000) stated that it is difficult for construction companies to
prove that systems for preventing quality failures are cost-effective.
The literature also indicated that some construction firms do not
measure all three categories of prevention, appraisal, and failure
costs, instead preferring to concentrate on failure costs. Numerous
studies have attempted to quantify the rework costs in civil engi-
neering projects. Their results are summarized in Table 1.
The failure costs reported in Table 1 have not been estimated
using the same method. Abdul-Rahman et al. (1996), Josephson
and Hammarlund (1999), Barber et al. (2000), and Jafari and
Love (2013) used field data collection in their case studies. Kazaz
et al. (2005), Abdelsalam and Gad (2009), Mills et al. (2009), and
Oyewobi et al. (2011) used inspection of related documents for
their studies. Burati et al. (1992), Love and Li (2000), and Hall
and Tomkins (2001) used both field data collection and document
inspection to achieve their purpose. However, Love (2002) and
Love et al. (2010) used a questionnaire survey to estimate COQ
in their case studies. Almost all the researchers stated that they
used interviews with key persons of the projects in the aim of es-
timating failure costs or quality costs correctly. Kazaz and Birgonul

Table 1. Percentage of Failure Cost in Proportion to Total Project Cost in Previous Studies
References Country Studied projects Sample size Percentage Failure cost
Burati et al. (1992) United States Industrial 9 12.4 Direct costs
Abdul-Rahman et al. (1996) U.K. Industrial 1 6 Cost of resources + time-related costs
Josephson and Hammarlund (1999) Sweden Building 7 2.3–9.4 Direct costs
Barber et al. (2000) U.K. Roadway 2 16–23 Direct costs + delay costs
Love and Li (2000) Australia Industrial 1 2.4 Direct costs
Building 1 3.15
Hall and Tomkins (2001) UK Building 1 5.8 Direct costs + delay costs
Love (2002) Australia Building 161 12.0 Direct costs + indirect costs
Kazaz et al. (2005) Turkey Building 3,100 11.59 Internal and external failure costs
Abdelsalam and Gad (2009) UAE Building 291 0.7 Internal failure costs
Mills et al. (2009) Australia Building 800,000 4 Direct costs + examine the claim costs
Love et al. (2010) Australia Infrastructure 115 10.29 Direct costs + indirect costs
Oyewobi et al. (2011) Nigeria Building 25 3.47 Direct costs
Jafari and Love (2013) Iran Monorail 1 0.05 On-site costs

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 (2005a, b) also used interviews with householders to evaluate the
quality level of the constructed projects.
The review of literature shows that although several construc-
tion quality costing systems have been developed, they are neither
popular nor widely used (Jafari and Rodchua 2013). Among
them are quality performance management system [Construction
Industry Institute (CII) 1989], quality performance tracking system
(Davis et al. 1989), quality cost matrix (Abdul-Rahman 1993),
construction quality cost quantifying system (Low and Yeo 1998),
quality cost tracking system on the process cost method (Aoieong
et al. 2002), and prototype project management quality cost
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system (Love and Irani 2003). Jafari and Rodchua (2013) summa-
rized the characteristics of those systems and their application in
construction.
Methodology
As shown in Fig. 1, the methodology of this research comprises
three main approaches:
• Collection and analysis of data: For the purpose of this study,
the research approach undertaken by Love (2002) and Love
et al. (2010) is adopted, presented in the section “Collection
of Data.” To increase the reliability of the results, a survey using
structured interviews is conducted to specify common quality-
related activities and quality costs in the mass-housing projects.
Furthermore, rather than seeking the respondents’ general opi-
nions about quality-related activities and quality costs, intervie-
wees are asked to focus on their ongoing project. As indicated
by Love et al. (2010), this has the effect of enriching the data so
that a more meaningful analysis could be completed.
Collection of Data
Population Identification
Sample Size Determination
Questionnaire Framework
Development
Survey Conduction
Analysis of Data
Quality-related Activities
Level of Conformance to Quality
COQ Elements
Total COQ
COQ Evaluation Model Development
Curve Fitting of COQ
Justification for the COQ Evaluation
Model
Application of COQ Evaluation Model
Calculation of Optimum Level of COQ
Evaluation of Potential Cost Savings
Evaluation of Quality Management of
Projects
Fig. 1. Research methodology
© ASCE 04014004-3
J. Constr. Eng. Manage., 2014, 140(5): 04014004
• COQ evaluation model development: The theory underlying the
COQ indicates that preventive and appraisal efforts are inversely
related to failure cost (Shank and Govindarajan 1994). Hall and
Tomkins (2001) stated that the optimum conformance of quality
can be reached when the increasing costs of the prevention and
appraisal curve converges with the decreasing failure cost curve.
The total quality cost curve represents the sum of the other two
curves and the location of the minimum point on the total quality
cost curve. The latter point is sometimes called the optimum
point, depending on the shapes of the two lower curves (Kazaz
et al. 2005). In this research, on the basis of a six-step approach
(which is described in the following sections), the conformance,
the nonconformance, and the total quality cost curves are plotted
by fitting third-order polynomial trend lines to the compiled data.
• Application of the COQ evaluation model: The optimum level of
COQ, as the minimum point of the COQ curve, is calculated ac-
cording to the partial derivative of the COQ curve. According to
the classic model, this is the point that managers hope to reach at
which the trade-off between prevention and appraisal costs is ba-
lanced with failure costs. Following Hall and Tomkins (2001),
this optimum point will vary according to the nature of the project.
As the application of the COQ developed model, the optimum
level of COQ is determined according to a partial derivative
equation. Then, the potential quality cost savings are evaluated
according to the optimum level of COQ, as a possible result
of quality-management approach to the optimum level of COQ.
These approaches are implemented through the following
stages (Fig. 1):
1. Identifying and classifying the most important quality-related
activities in construction projects on the basis of the P-A-F
model through literature review and survey study;
2. Collecting the cost of classified quality-related activities
through survey study;
3. Analyzing COQ data and developing the model for evaluating
the COQ and its optimum point for construction projects
according to the collected data; and
4. Estimating the potential cost saving as a result of the plan qual-
ity management to reach the optimum level of COQ.
Collection of Data
Questionnaire Framework Development
A questionnaire based on the P-A-F classification scheme is
developed for determining the costs of quality in this study. To at-
tain more-reliable survey results of the COQ, the most common
quality-related activities are classified as a part of the questionnaire
framework. Fig. 2 shows the list of classified quality-related activ-
ities. The elements of the P-A-F model are classified into conform-
ance and nonconformance costs, which consist of the prevention
and appraisal costs and failure costs, respectively.
Population Identification
The population of this study consists of all companies and organ-
izations certified to work as mass-housing contractors. According
to the Iranian Mass-Housing Association (2011), there are 650 such
contractor organizations.
Sample Size Determination
Cochran developed the following formula to calculate the sample
size of large populations (George and Mallery 2006):
J. Constr. Eng. Manage.
 Training of staff
Motivating of staff
Design review and Drawings check
Prevention
Developing and Supporting quality plans
Selection of qualified sub-contractors and suppliers
Conformance Root cuase analysis of non-conformances and
conducting preventive actions
Material inspection and testing
Appraisal In-process inspection and testing
COQ
Product inspection and testing
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Internal In-process reworks and corrective actions

failure
Non- Product repairs
conformance Warranty works
External
Failure Customer complaints

Fig. 2. Quality-related activities framework for survey questionnaire


t2 ·S2 The demographic profiles of the experts, as the interviewees of
d2
n¼
 ð1Þ the selected projects, are shown in Table 3.
t2 ·S2
1 þ N1 d2
The interviewees were asked to
• Determine the frequency of each quality-related activity in their
where n = sample size; t = selected level of confidence; S = projects. A five-point scale [(1) very low, (2) low, (3) medium,
standard deviation in the population; d = acceptable margin of error (4) high, and (5) very high] is adopted to calculate the relative
for the estimated mean; and N = population size. importance of each quality-related activity; and
By considering the Cochran formula on the basis of a 90% • Estimate the approximate costs of prevention, appraisal, and
confidence level (t ¼ 1.64), unknown population (S ¼ 0.5), 10% failure groups of quality-related activities in comparison with
margin of error (d ¼ 0.1), and a population size of 650 (N ¼ 650), the total project cost. A five-point scale of less than 2%, 2–5%,
the minimum sample size of mass-housing contractors is 60. 5–10%, 10–15%, and more than 15% is adopted to estimate the
cost of quality components.

Survey Conduction
After modifying the developed questionnaire according to a pilot
study, 77 interviews were conducted with 60 contractors of 60
mass-housing projects. The sample elements were identified among
contractors involved in one of the largest sites of mass-housing
projects in Iran. The projects were selected on the basis of their
types of structural systems, numbers of stories, and their diversity
of location in Parand, Tehran. The selected projects featured
approximately 880,000 m2 of 10,500 housing units as 1,250 multi-
story residential buildings. Each project was carried out by an
eligible contractor organization with a fixed lump sum price.
The demographic profiles of the projects are shown in Table 2.
Testing Reliability and Validity
The survey’s results are analyzed using Statistical Package for the
Social Sciences (SPSS Version 17.0) Statistics (Field 2013). To
measure the internal consistency or reliability of the questionnaire,
Cronbach’s test is used. The values of alpha for preventing, apprais-
ing, and failure-related activities groups are 0.704, 0.780, and
0.713, respectively, which were all higher than the acceptable
threshold of 0.7 (Nunally 1978; George and Mallery 2006). To test
the validity of the questionnaire, the correlation coefficient between
each item in one group and the whole group is achieved by using
the Spearman formula. Consequently, the p-values (significance)
are less than 0.01 for all results. The correlation coefficients of each

Table 2. Brief Summary of Projects Characteristics

Frequency Percentage
Table 3. Brief Summary of Respondents’ Characteristics
General information of projects of projects
Frequency of Percentage of
Structural system
General information respondents respondents
Light steel frame 27 45.0
Concrete frame 24 40.0 Job title
Still frame 9 15.0 Project manager 6 7.8
Number of units Site manager 37 48.1
Less than 100 9 15.0 Senior engineer 26 33.8
Between 100 and 200 35 58.3 Technical office manager 6 7.8
Between 200 and 300 9 15.0 Others 2 2.6
More than 300 7 11.7 Work experience (years)
Number of stories Fewer than 2 14 18.2
3 34 56.7 2–6 20 26.0
4 5 8.3 6–10 19 24.7
5 16 26.7 10–14 18 23.4
6 5 8.3 More than 14 6 7.8

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 item are significant at α ¼ 0.01, showing that the different sections failure group of activities is more common than the external failure
of the questionnaire are valid (Field 2013). group because of the short warranty period in the construction
projects.

Analysis of Data
Level of Conformance to Quality

Quality-Related Activities Complete elimination of failures in a project, as an ideal solution,

may not be cost-effective. In this ideal case, while the cost of failure
To evaluate quality-related activities, the relative importance index (i.e., nonconformance) approaches zero, the conformance costs of
(RII) method (Sambasivan and Soon 2007) is used appraisal and prevention approach infinity. In this regard, based on
P the P-A-F model, a project quality management may be established
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W
RII ¼ ð2Þ
A×N
where W = weight given to each factor by the respondents and
ranges from very low (1) to very high (5); A = highest weight
(i.e., 5); and N = total number of respondents.
By using the calculated RII for each quality-related activity,
these activities are ranked to identify the most common quality-
related activities in mass-housing projects. Moreover, RII is calcu-
lated for each quality-related group of activities (Table 4).
As shown in Table 4, the most common quality-related group
of activities is the appraisal group. This finding indicates that the
inspection and testing activities to identify nonconformances are
more important for mass-housing contractors than their prevention,
especially during the construction period. Likewise, the internal
between two boundary limits, including (1) the approach to the
maximum level of conformance to quality and (2) the approach
to the minimum level of conformance to quality.
Cost of Quality Elements
The survey results related to the elements of COQ are shown
in Fig. 3.
On the basis of the survey results, the value of each COQ
element is as follows:
• Prevention costs: As shown in Fig. 3(a), in more than 80% of
cases, these costs are less than 5% of the total project cost. They
are evaluated as 0–5% of the total project cost with a mean
of 3.2%.

Table 4. Relative Importance Index for Quality-Related Activities

Rank RII Quality-related activities Explanation
0.725 Preventing activities group
1 0.823 Root-cause analysis of The first step in preventing the problems is to survey them deeply, removing the problems and
nonconformances and preventing them to reoccur.
conducting preventive actions
2 0.777 Motivating the staff Companies try to motivate the staff to improve work quality by increasing salaries, for example.
3 0.771 Design review and Drawings Checking the plans and offering necessary changes before the execution phase will prevent
check incompatibilities of operational plans with each other, which can result in work stoppages until the
plans get modified.
4 0.722 Selection of qualified Considering factors such as work experience and quality of work and products makes selection of the
subcontractors and suppliers best contractor a time-consuming and costly procedure.
5 0.641 Developing and supporting Because of the mass-housing goal in the case study, contractors are not interested in spending
quality plans considerable money and time on the development of quality plans.
6 0.618 Training of staff Most respondents believe that under the conditions of high compression of mass-housing and the lack
of necessary job stability in Iran, spending money on staff training is not reasonable and economical
for companies because they may leave the organization some time after training and transfer to
another.
0.813 Appraising activities group
1 0.847 In-process inspection and The first and most important activity that companies carry out to control and examine a project is to
testing inspect and ensure precision and accuracy during performance.
2 0.810 Product inspection and testing After the completion of the execution phase, initial inspections may unearth some nonconformances
during the construction that the contractor is responsible for.
3 0.782 Material inspection and testing Because reducing construction costs is the main goal of mass-housing contractors in the case study,
they are not interested in setting up an equipped laboratory in a construction site and prefer to choose a
trustworthy supplier for assuring the quality of the materials.
0.716 Internal failure-related activities group
1 0.745 In-process reworks and Remedying the nonconformances closer to project delivery time would inflict more expenses on the
corrective actions company.
2 0.688 Product repairs Postponing the elimination of defects until the end of the project would impose higher costs on the
project.
0.509 External failure-related activities group
1 0.649 Warranty works Every organization inevitably tries to avoid anything that causes dissatisfaction for the client or the
beneficiary because it may lead to notoriety for future projects.
2 0.369 Customer complaints The reason the construction companies and organizations try to avoid legal claims is that such legal
entanglements not only can easily impair their reputation but may also impose high costs on the
organization.

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 60%

Number of Projects (%)

values of the COQ are both 15–20% of the total project cost. Also
50%
the total COQ costs are evaluated as 15–20% of the total project
40%
cost with a mean of 17.8%.
30% The results show that the failure costs in this study are between 2
20% and 15% of the total project cost with a mean of 9.3%, which is
10% comparable to the reported nonconformances costs in previous
0% studies: 2.3–12.4%, for the different types of projects (Table 1).

<2%

<2%
2-5%
5-10%
10-15%
>15%

2-5%
5-10%
10-15%
>15%
(a) (b) COQ Evaluation Model Development
60%
Number of Projects (%)
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50% Curve Fitting of COQ

40% As the first stage of studying the optimum COQ, the conformance
30% cost, the nonconformance cost, and the total quality cost curves
20% were plotted using the compiled data. For this purpose, a six-step
10% approach was developed:
0% 1. Each company represents a separate mass-housing project.
<2%
2-5%
5-10%
10-15%
>15%

<2%
2-5%
5-10%
10-15%
>15%
(c)
Fig. 3. COQ elements: (a) prevention costs; (b) appraisal costs;
(c) internal failure costs; (d) external failure costs
• Appraisal costs: As shown in Fig. 3(b), in more than 90% of
cases, these costs are less than 10% of the total project cost.
They are evaluated as 2–10% of the total project cost with a
mean of 5.3%.
• Internal failure costs: As shown in Fig. 3(c), in more than 80%
of cases, these costs are less than 10% of the total project cost.
They are evaluated as 2–10% of the total project cost with a
mean of 6.2%.
• External failure costs: As shown in Fig. 3(d), in more than 80%
of cases, these costs are less than 5% of the total project cost.
They are evaluated as 0–5% of the total project cost with a mean
of 3.1%.
Total COQ
The total COQ is the aggregation of prevention, appraisal, internal
failure, and external failure costs. To calculate the total COQ, the
midpoint of each estimated interval from each respondent is
summed up, and the results are categorized in the intervals with
a domain of 5% (Fig. 4). As depicted in Fig. 4, the total COQ cov-
ers a wide range of percentage values; as a result, understudied
mass-housing projects are being executed in different levels of
quality performance. As shown in Fig. 4, the median and mode
30%
Number of Projects (%)
Therefore, if there were more than one respondent from
one company, the average of respondents’ results would be
(d) considered as the project data;
2. The sum of prevention and appraisal costs, as well as the sum
of internal and external failure costs, is calculated separately
for each project as conformance and nonconformance cost,
respectively;
3. The total COQ is calculated by summing up both conformance
and nonconformance costs for each project;
4. The values for nonconformance costs of projects are arranged
in a descending order;
5. The highest level of conformance to quality, as maximum
value of x, allocates to the minimum value of nonconformance
costs, and the lowest level of conformance to quality, as mini-
mum value of x, allocates to the maximum value of noncon-
formance cost; and
6. The values for conformance costs, nonconformance costs, and
the total COQ represent three polynomial trend lines.
According to Kazaz et al. (2005), a second-order polynomial
trend line is used for the best-fitting curve. In this study, this curve
shows that the conformance costs curve is not strongly ascending
and is not well fitted to the represented data (R2 ¼ 0.251). That is,
in Iranian mass-housing construction, the high level of prevention
and inspection does not necessarily indicate that the project is of
good quality. To solve the problem, the data are fitted with third-
order polynomial trend lines (R2 ¼ 0.559). The functional relation-
ship is assumed to be
y ¼ c0 þ c1 x þ c2 x2 þ c3 x3 ð3Þ
where x = level of conformance to quality.
The results are shown in Fig. 5. Altering the classic model of the
COQ evaluation has fundamentally changed the conformance
curve. It presents a new quality zone in which the conformance
cost is approximately constant whereas the nonconformance cost

25%
is variable.
20%

15%
Justification for COQ Evaluation Model
10%
The developed model of COQ optimization for conforming to the
5% construction conditions consists of four quality zones (Fig. 6).
0% • Zone 1: In this zone, failure costs are high and prevention costs
are low. An organization that has a poor quality-management
<5%

>30%
5-10%

10-15%

15-20%

20-25%

25-30%

system may be located in this zone, where the amount of defects

is high and the COQ is at the maximum levels;
• Transition zone: In this zone, the conformance cost is constant;
Fig. 4. Total COQ as percentage of total project cost
however, the nonconformance cost is variable. An organization

© ASCE 04014004-6 J. Constr. Eng. Manage.

J. Constr. Eng. Manage., 2014, 140(5): 04014004

 45 y = -0.0001x3 + 0.0202x2 - 1.3791x + 37.985
R² = 0.9627
Cost percentage in proportion of total
40 y= 0.0005x3 - 0.0525x2+ 1.6152x - 3.1658
R² = 0.5591
35 y = 7E-05x3 - 0.0072x2 - 0.2041x + 33.976
R² = 0.9264
30
project cost (%)
25
20
15
10
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0 Application of COQ Evaluation Model
Level of Conformance to Quality
Fig. 5. Fitting the curves for COQ evaluation
Conformance to Quality
Total COQ
Optimal
Point
Cost
Non-conformance
Conformance
Zone 1 Transition Zone
TCOQ 25-40% 12-25%
NCC 15-30% 7-15%
TCOQ: Total Cost of Quality
NCC: Non-conformance Costs
Fig. 6. Developed COQ evaluation model
that tries to improve its quality system may be located in this
zone, where the amount of appraisal and preventive costs are
approximately constant, but the amount of failures can be re-
duced considerably. This is not the case in the classic model.
According to Davis et al. (1989), manufacturing quality man-
agement, as the basis for the classic model, normally involves
assembly-line products after the assembly process has been
designed, constructed, and optimized. However, as the basis
for the developed model, construction quality management
normally involves a unique project with a lot of changes and
reworks during the design and construction processes. Accord-
ing to Hwang et al. (2009), for those projects in which cost tends
to be more affected by rework, project managers should focus
on minimizing rework by developing systems for addressing the
sources of rework. Therefore, when an organization sets up the
quality-management system by investing in the preventive and
appraisal efforts, this newly established system can be improved
by focusing on the sources of reworks without considerable ex-
tra funding. Obviously, this improvement causes a decrease of
failure costs without any further prevention or appraisal costs
and creates the “transition zone”;
• Zone 2: This zone is the adjacent area of the optimum COQ. An
organization that has made a balance between quality attempts
© ASCE
and their costs may be located in this zone, where the quality
defects are at a reasonable level but COQ is at the minimum
level; and
• Zone 3: In this zone, failure costs are low, and appraisal costs are
Prevention + Appraisal costs high. According to Yasin et al. (1999), an increase in the level of
Failure costs conformance can only be achieved through costly appraisal ac-
Total cost of quality
tions, in which failure costs are at an acceptable level and qual-
ity-enhancing preventive measures are infeasible or unavailable.
An organization that has a strong quality-management system
but does not figure on quality costs may be located in this zone,
where the amount of defects is low but the COQ is still high.
Calculation of Optimum Level of COQ
By using the following equation, as shown in Fig. 5, the optimum
COQ will be calculated:
COQ ¼ 0.00007x3 − 0.0072x2 − 0.2041x þ 33.976 ð4Þ
where x = level of conformance to quality.
The minimum value of the COQ curve is determined according
to the following partial derivative equation:
∂COQ
¼0 ð5Þ
∂x
As a result, x = 80.6. By substituting this value of x in Eq. (4),
the total COQ is calculated as 7.4% of the total project cost. This
is the minimum (or optimum) value of the COQ curve that man-
agers hope to reach, in which the prevention and appraisal costs are
Zone 2 Zone 3 balanced with the failure costs.
6-12% 12-20%
3-7% 0-3% Evaluation of Potential Cost Savings
The average of the total COQ in mass-housing projects in this study
is 17.8% of the total project cost, which is considerably higher than
the optimum quality cost of 7.4% of the total project cost. It illus-
trates that managing the quality costs and endeavoring to reach the
optimum amount of quality costs results in savings of approxi-
mately 10% of the total project cost.
Moreover, as Abdelsalam and Gad (2009) stated, although the
COQ optimization model trade-off does provide the manager with
a framework in the quest for an optimum level, it has certain
limitations as the model does not include the hidden costs associ-
ated with poor quality, i.e., future lost sales and loss of customer
goodwill.
Evaluation of Quality Management of Projects
The optimum level of COQ is the point that managers attempt to
access. Therefore, the companies on the left-hand side of the opti-
mum point have insufficient concern on quality management, and
they need to improve their process.
As shown in Fig. 6, each quality zone is specified by classifying
project nonconformance costs (NCC) and the total COQ. Conse-
quently, each project’s contractor can assess its position in the
developed model of the COQ optimization, evaluate its quality-
management level, and compare its quality costs to those of the
other companies.
By specifying quality zones, Zone 1, the transition zone, Zone 2,
and Zone 3 include 13 (22%), 27 (45%), 12 (20%), and 8 (13%)
projects, respectively. Therefore, most of the studied projects are in
the transition zone, where contractors attempt to improve their
04014004-7 J. Constr. Eng. Manage.
J. Constr. Eng. Manage., 2014, 140(5): 04014004

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Fig. 7. Conformance to quality of building structural systems
quality-management systems. The least number of contractors are
in Zone 3, where conformance to quality is in the highest level.
Fig. 7 shows the level of conformance to quality of projects in
terms of their building frame structures. As shown in Fig. 7, steel
frame structures have the best conformance to quality (most of
these projects are located in Zones 2 and 3), and concrete frame
structures have the worst conformance to quality (most of these
projects are located in Zone 1 and the transition zone).
Conclusion
This paper studied quality costs in the construction industry by
focusing on quality-related activities and costs in mass-housing
projects in the developing country of Iran. The frame of study
was the P-A-F model, which is the most widely used model for
determining and classifying quality costs. In this research, by con-
ducting 77 structured interviews on 60 mass-housing projects, the
most common quality-related activities and components of quality
costs were specified.
According to survey results, the most common quality-related
activities were “root-cause analysis” of preventing activities group,
“in-process inspection and testing” of appraising activities group,
and “in-process reworks and corrective actions” of failure-related
group.
In this study, a model for evaluating the COQ conforming to
the studied projects was developed by fitting the third-order poly-
nomial trend lines to the compiled data. As a result, a transition
quality zone was added to the classic model. In this zone, the con-
formance cost is constant; however, the nonconformance cost is
variable. The transition zone illustrates that, in some situations
in construction projects, without further spending money for more
prevention and appraisal efforts, there is potential to decrease the
failure costs.
By using the developed model, the optimum level of COQ was
estimated as 7.4% of the total project cost. The results indicated
that the average potential quality cost savings in projects was ap-
proximately 10% of the total project cost. This average amount of
potential cost savings is considerable and should be saved by the
improvement of quality-management processes in projects. Also,
most of the studied projects were in the transition zone, where con-
tractors attempt to improve their quality-management systems, and
the least number of contractors were in Zone 3, where conformance
to quality is in the highest level.
This paper introduced a new model for evaluating the COQ and
its optimum level in mass-housing projects. The model evaluated
the potential of savings in quality costs as a result of achieving the
optimum level of COQ. This model may help project managers to
plan quality management in mass-housing projects to reach the op-
timum level of COQ. This approach can be used to evaluate cost of
© ASCE 04014004-8
J. Constr. Eng. Manage., 2014, 140(5): 04014004
quality in other fields of the construction industry especially in
developing countries.
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