Cost of Quality (COQ) and its related concepts (cost of conformance, cost of nonconformance, prevention costs, appraisal costs, internal failure costs, external failure costs) are some of the most important Quality management concepts. Questions related to these concepts frequently appear in all major quality-related exams, interviews, and certifications including the Project Management Professional (PMP).
What is Cost of Quality (COQ)?
Cost of Quality (COQ) is the cost that needs to be incurred to make a quality product.
COQ is also defined as the sum of all costs incurred to ensure that the project conforms to the requirements.
PMBOK defines Cost of Quality (COQ) as “All costs incurred over the life of the product by investment in preventing nonconformance to requirements, appraisal of the product or service for conformance to requirements, and failure to meet requirements (rework).”
The overall Cost of Quality (COQ) can be divided into two categories
- Cost of Conformance – It is the cost incurred/spent during the project to avoid failures or to ensure quality.
- Cost of NonConformance – It is the cost incurred/spent during and after the project because of failures due to poor quality.
What is Cost of Conformance (COC)?
COC is the money spent, or costs incurred, during the project to avoid failures or to ensure quality.
Types of Cost of Conformance
- Prevention Costs
- Prevention costs are the cost to prevent errors and develop quality products.
- Eg: costs related to training, Documentation processes, Equipment, etc.
- Appraisal Costs
- Appraisal costs are the costs to assess the quality of the product from time to time. They are the costs related to evaluating, measuring, auditing, and testing the products, deliverables, or services of the specific product.
- Eg: Costs related to Testing, Inspections, etc.
What is Cost of NonConformance?
Cost of Non-Conformance is the money spent or costs incurred during or after the project, because of failures due to poor quality.
Types of Cost of NonConformance
- Internal Failure Costs
- These are failure costs that are identified by the project.
- These are costs that occur before the product is released.
- Eg: Rework, Scrap
- External Failure Costs
- These are failure costs that are identified by the customer.
- These are costs that occur after the product is released to the customer.
- Eg: Warranty work, Liabilities, Lost business, etc.
Cost of Conformance should always be lesser than the Cost of NonConformance
If the Conformance cost is greater than the Cost of Non-conformance, it essentially means, the amount of money you spend to avoid failures/ensure quality is more than the losses you suffer because of failures due to poor quality. This situation makes spending on ensuring quality illogical. So, the Cost of Conformance should always be lower than the Cost of NonConformance.
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Which is better for the company to control, cost of comformance or cost of non comformance? And why?
Cost of Nonconformance is not just loss of money but there are also intangibles such as credibility of the PM and also the Organisation at large. So it is always good to go with controlling cost of conformance and striving for better quality. I am open to discussion and suggestions on this…
What actions can project manager planned to avoid costs of non-conformance of a new product delivered by new supplier for the first time.