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Determining the cost of poor quality and its impact on productivity and profitability

Shahid Mahmood (University of Engineering and Technology, Taxila, Pakistan)
Syed M. Ahmed (Department of Construction Management, East Carolina University, Greenville, North Carolina, USA)
Kamalesh Panthi (Department of Construction Management, East Carolina University, Greenville, North Carolina, USA)
Nadeem Ishaque Kureshi (Center of Advance studies in Engineering, Islamabad, Pakistan)

Built Environment Project and Asset Management

ISSN: 2044-124X

Article publication date: 7 July 2014

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Abstract

Purpose

The purpose of this paper is to examine how effectively the cost appraisal system proposed measures the cost of poor quality (COPQ) in a construction project. The paper first formulates how COPQ can be measured and later clarifies the relationship between COPQ, labor productivity, and profitability.

Design/methodology/approach

In order to measure COPQ, the researchers prepared data entry forms for recording COPQ items on a daily basis and formulated the cost contribution of lost material, lost man-hours, lost machinery hours, and lost overhead on the overall COPQ for the project. The proposed method was then applied in a case study.

Findings

The results showed that, for the 60-days study period, COPQ decreased by about 24 percent while labor productivity and profitability increased by about 17 and 11 percent, respectively, after the implementation of COPQ measuring system. This study further supports the use of the COPQ system in construction projects as a mechanism to facilitate continuous improvement.

Originality/value

COPQ is a major cost that is often ignored in construction projects due to the difficulty of measuring it. This paper presents a COPQ measuring and recording system capable of identifying COPQ. The implementation of the system is shown to increase productivity and profitability as demonstrated by the project used for the case study.

Keywords

Citation

Mahmood, S., M. Ahmed, S., Panthi, K. and Ishaque Kureshi, N. (2014), "Determining the cost of poor quality and its impact on productivity and profitability", Built Environment Project and Asset Management, Vol. 4 No. 3, pp. 296-311. https://doi.org/10.1108/BEPAM-09-2013-0034

Publisher

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Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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