Helping Trades to think through the Cost of Quality. The Impact to their Profits

April 13, 2015

Here is a structure that you can provide to your trades to help them think about Cost of Quality in their business.

Cost of Quality is 3% of revenue, what is that in your company in $

For most companies the breakdown or profile of Cost of Quality is:

Failure Costs 70%

Appraisal Costs (Audits) 25%

Prevention Costs 5% (increasing THIS will reduce failure costs)

What is your profile?

Cost of Rework is 2-20% of a projects total contract amount, what is that for each of your projects in $ ? If you don’t know estimate or pick what you thing is a fair percentage and just see what that is in $

What is the cost per return (punchlist) repair and warranty repair including labor, material, fuel and truck costs?

What are your average number of trips to repair warranty issues? Is it just one, or is it two or three or……? The longer it takes the more trips the more money AND the lower the customer satisfaction score and chance of a recommendation.

What is your average number of days to complete a warranty issue?

What are your Top 5 defects for Construction and Warranty? These will provide you with ideas of where to spend more prevention time!


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. A former Professor of Quality at the University of Wisconsin, he has experience as a quality manager in the home building industry as well as construction engineer, site manager, and in training, auditing, and consulting with expertise in strategic and operational quality improvement initiatives. His work has achieved national quality, environmental, and safety management awards for clients. 

Denis is co-author of The Executive Guide to Understanding and Implementing the Baldrige Criteria: Improve Revenue and Create Organizational Excellence.