What Is the Cost of Quality? | PMP Exam

Project success is determined, in part, by the quality of the product being produced as well as the quality of the project itself. The quality of the product is determined by how well the product, service, or project outcome meets the stakeholders’ needs and expectations. The quality of the project is determined by the ability to deliver the project within the defined constraints of schedule and cost, while also providing the intended value to the organization.

Project quality management involves managing, estimating, and controlling the costs associated with product quality. The cost of quality can be categorized as the cost of conformance and the cost of non-conformance. Costs associated with both conformance and non-conformance should be considered, analyzed, and monitored throughout the project. The costs of conformance and costs of non-conformance are inversely related, meaning that theoretically, the more we spend on conformance, the less we will have to spend on non-conformance.

1. Cost of Conformance
   
   The cost of conformance is money spent to ensure quality, for both prevention and appraisal activities. The cost of conformance for prevention includes process documentation, training, and quality activities. The cost of conformance for appraisal involves activities such as testing, audits, and inspections. The cost of activities that fall under the umbrella of quality assurance is also considered the cost of conformance. Quality assurance typically involves evaluating and auditing the processes that are in place to ensure they support producing high-quality products or results.

   During project planning, quality and acceptance criteria and quality risks should be evaluated and analyzed to determine the acceptable level of spending associated with the quality activities on the project. This budget will vary from project to project depending on the project outputs and deliverables. For example, a project to develop a $3 item will most likely spend less on quality activities than a project that is developing a $1 million product.
2. Cost of Non-Conformance
   
   The cost of non-conformance is money spent because of failures. Non-conformance are those costs associated with failures, including those discovered by the project and those discovered by the customer or end-user (escaped defects). Within the project, non-conformance costs may come from inconsistent results, scrap, and rework, for example. External failure costs may stem from damage to the organization’s reputation, paying for warranties, or having returned items or send-backs.

   The challenge with the cost of non-conformance is that it is often difficult to estimate those costs until after the non-conformance has occurred. Therefore, the project manager must balance what they spend proactively on the cost of conformance to keep the cost of non-conformance within an acceptable range.

3. In Summary
   
   Quality management is and should be a significant focus for any project manager. Being able to analyze, estimate, and monitor the costs associated with quality activities is an expectation of all skilled project managers. Cost estimating and budgeting must include the cost of quality, encompassing both the cost of conformance and the cost of non-conformance. As with all project work, the project manager should consistently monitor any variances between the expected costs of quality and the actual money spent on conformance and non-conformance.

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