Denis Leonard has a degree in construction engineering an M.B.A. and a Ph.D. in quality management. Denis is a Fellow of the American Society for Quality, a Certified Quality Manager, Auditor and Six Sigma Black Belt. He has been an Examiner for the Baldrige National Quality Award Board of Examiners a Judge on the International Team Excellence Competition and a Lead Judge on the National Housing Quality Award.
Studies show that across industries Cost of Quality (Failure, Appraisal & Prevention) is: 2.6-4% of sales revenue.
In the construction industry the Cost of Quality profile is:
70% spent on Failure Costs
25% on Appraisal Costs and only
5% spent on Prevention Costs.
The cost of correcting deviations from construction specification is 12% of project cost whereas
the cost of providing quality management is only 1-5% of project cost.
A research study found rework costs on a study of 260 construction projects:
A report last year by the NAHB Research Center found that “increasingly, today’s homebuyers want energy-efficient, low-maintenance, well-insulated and well-sealed homes. Survey data in the last few years has also shown that consumers are willing to pay a premium for these types of homes and that they are typically more satisfied with them than with their previous, less efficient homes.
The Six Sigma methodology DMAIC (Define, Measure, Analyze, Improve and Control) is used to improve an existing process.
Design for Six Sigma is used to design a new product or service.
The methodology used is DMADV (Define, Measure, Analyze, Design and Verify).
Define the goals and customer (internal & external) requirements. What is Critical to Quality.
Measure customer needs and specifications this should include benchmarking competitors.
Analyze the options.
It is critical to know what our customers think of living in the homes we build for them and what it was like to be involved in the design and construction process with us. In the case of survey results, this is a lagging indicator but still a track record of how we have done and it is powerful data. The more accurate the data and the faster we gather and act upon this data the more quickly we can listen, evaluate, correct anything that went wrong, prevent it happening again and seek further opportunities to improve.
A recent research study on quality in construction projects established the following Quality Problem Factors as the sources of quality defects.
Quality Problem Factors
In a recent study rework costs (including labor, materials, equipment and subcontractors) can run from 2% to 20% of a project's total contract amount according to the Construction Industry Institute. These costs are of course eventually passed on to the customer as profitability shrinks.
The questions raised by this are:
What is your cost of rework?
What quality tools are you using to reduce those costs?
Some things to consider when evaluating your trade partners and creating a scorecard include the following:
In a recent study the following quality tools were found to be the most commonly and successfully used:
- Identification and leverage of core competencies
- Process improvement
- Strategic planning
- Balanced scorecards
- Customer relationship management
Of course using and linking all of these together in a coordinated manner creates the greatest leverage.
This study provides further evidence that that integrating quality tools and methods into green building creates greater leverage! In this study they found specifically that using the Baldrige Criteria helped to manage the LEED projects better. The National Housing Quality Award (NHQA) is aligned with the Baldrige Criteria.
In a new study on Six Sigma the savings to cost ratio ranged from 2.6 : 1 through to 2 : 1. As for cost savings as a percentage of revenues, the average was 1.7%. This study showed clearly the impact of Six Sigma and its ROI.
As a rule of thumb a company with $100 million in sales could expect $1.5 million of direct savings per year of implementation.
(Costs and Savings of Six Sigma Programs: An Empirical Study, Quality Management Journal, October, 2012)