Quality-Costing-and-Lessons-Learned-on-Projects - EPPM

5th International Conference on Engineering, Project and Production Management
27 November 2014
Quality Costing and Lessons Learned on Projects
Port Elizabeth, South Africa
Hannelie Nel
The BIE Group
The BIE Value Statement
BIE is the largest non-listed quality
management company in the world.
It’s an international and independent
third-party company that has the
capability and highly-skilled resources
to provide Project Management and
Quality Services from project design
to commissioning. BIE also provides
Quality Assurance on manufacturing
and installation during project
execution; and offers Quality Costing
throughout the project lifecycle.
Quality Costing and Lessons Learned on Projects
BIE Became listed in 1994 on the
UNITED Nations Approvals Scheme
for the inspection of commodities
and materials deployed to sensitive
international regions of the world.
2
BIE Group Global Footprint
Quality Costing and Lessons Learned on Projects
3
Project Assurance
 Value creation
 Project review
 Quality assurance
FEL




Supply chain management
Contract management
Quality control
Cost and schedule control
EXECUTION
LESSONS
LEARNED


Identification of lessons
learned
Cost of Quality
CLOSE-OUT
 Project close-out
 Business case close-out
Quality Costing and Lessons Learned on Projects
4
Scope
1
The ASQ Global State of Quality 2013
2
Global Infrastructure Spending 2014 - 2025
3
Restructuring Activities of CEOs 2013
4
The Business Cost of Poor Quality
5
Quality Costing the PAF Model
6
The Cost of Quality Incidents
7
Project Lessons Learned
8
Design of a Lessons Learned System
9
Lessons Learned Trending
10
Preventive Measures
Quality Costing and Lessons Learned on Projects
5
The ASQ Global State of Quality 2013
1
“Quality is free. It’s not a gift, but it’s free. What costs money are the unquality things – all
the actions that involve not doing jobs right the first time.” - Philip Crosby
30 Global Companies benchmarked in 2011 for quality performance measures: 1991 respondents
Quality Costing and Lessons Learned on Projects
6
ISO 9001 Global Growth 1993-2011
1
1 200 000
1 000 000
800 000
Middle East
600 000
Central and South Asia
East Asia and Pacific
400 000
Europe
North America
200 000
Central and South America
Africa
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Quality Costing and Lessons Learned on Projects
7
ISO 9001 Listed Companies BRICS
1
350 000
328 213
300 000
250 000
200 000
150 000
100 000
50 000
29 574
28 325
12 663
0
ISO Companies
China
328213
Quality Costing and Lessons Learned on Projects
India
29574
Brazil
28325
Russia
12663
0.3% Global Listing
3 409
South Africa
3409
8
ISO 9001 Companies per Global Sector
120 000
1
101 848
100 000
8.4% Global Sector
83 864
79 237
80 000
60 000
40 000
31 086
20 467
20 000
2 766
1 948
1 626
1 535
612
465
Mining and
quarrying
Electricity supply
Manufacture of
coke & refined
petroleum
products
Water supply
Gas supply
Nuclear fuel
0
Basic metal &
fabricated metal
products
Construction
Electrical and
optical equipment
Quality Costing and Lessons Learned on Projects
Engineering
Services
Information
technology
9
ISO 9001 RSA Companies
700
1
654
600
500
400
312
300
295
281
185
200
182
170
156
133
130
100
122
0.01% Global Sector
56
55
0
Basic metal,
fabricated
metal
products
Electrical,
optical
equipment
Other
services
Chemicals,
products,
fibres
Quality Costing and Lessons Learned on Projects
Transport,
Rubber,
storage,
plastic
communication products
Machinery,
equipment
Engineering
services
Food
products,
beverages,
tobacco
Other
transport
equipment
Wholesale,
Concrete, Construction
retail, trade, cement, lime,
motor
plaster
vehicles
10
Global infrastructure spending to
reach $9 trillion by 2025
3
Worldwide, capital project
and infrastructure spending
is expected to total more
than $9 trillion by 2025, up
from $4 trillion in 2012
Total Quality Costs may
constitute 8% - 15% of total
construction costs.
Economic return generated
for every dollar spent on a
capital project
Source: Oxford Economics
Quality Costing and Lessons Learned on Projects
11
Restructuring Activities of CEOs
3
Which of the following restructuring activities have CEOs initiated in the past 12 months?
All CEOs
Completed a domestic M&A
Completed a cross-border M&A
Sold majority interest in a
business or exited a
significant market
Outsourced a business
process or function
Insourced a previously
outsourced business process
or function
Implemented a costreduction initiative
Entered into a new strategic
alliance or joint venture
Ended an existing strategic
alliance or joint venture
0%
20%
40%
60%
80%
Source: www.pwc.com – Capital Projects and Infrastructure 2013
Quality Costing and Lessons Learned on Projects
12
The Business Cost of Poor Quality
4
QUALITY
PROJECT
MANAGEMENT
COST
Quality Costing and Lessons Learned on Projects
SCHEDULE
The inter-relationship of quality, cost
and schedule is likely to be unbalanced
in favour of schedule and costs – and
often unwittingly at the expense of
quality. This imbalance will continue to
exist as long as the real cost of quality
remains hidden among total costs.
Such a condition can incur a still
greater imbalance whenever the rising,
but hidden true cost of quality grows to
a magnitude that can significantly
affect a company’s competitive
position.
13
The Business
Cost
of
Poor
Quality
The Business Cost of Poor Quality
4
• Safety and environmental implications due to noncompliance with statutory quality requirements.
The Cost of Quality
• Non-conformance of products.
• Replacement and rework cost.
• Project delays due to non-compliance with regulations
and resultant rework.
• Lack of quality management (QA & QC) on a
project/service/ product.
• Lack of quality requirements in Client enquiries or final
contracts with Suppliers.
• Incompetent suppliers leading to delivery of
substandard products/services.
• Project delays due to replacement of suppliers.
• Additional cost and compensation claims from suppliers.
• Reduced plant availability, reliability and life.
Quality Costing and Lessons Learned on Projects
14
Quality Costing the PAF Model
Total external failure costs,
R 88.8 – 28%
5
Total prevention costs,
R 97.3 million - 30%
COST OF QUALITY SUMMARY REPORT BASED
ON OPERATING EXPENDTURE
TIME PERIOD: MARCH 2007 – JULY 2010
48%
Total Failure Costs as % TQC
52%
Total Quality Costs as % Operating
Expenditure
27%
Quality Costing Benchmark for an efficient QMS:
Failure costs as a % of TQC: 8% - 10%
Total quality costs
Internal and
external failure costs
Prevention and
appraisal costs
TQC as a % of Operating Expenditure: 20%
0
Quality Costing and Lessons Learned on Projects
Total appraisal costs,
R 56.7 - 18%
Total internal failure costs,
R 77.7 – 24%
Quality Costs (R)
Total Prevention & Appraisal Cost as % TQC
Quality of conformance (%)
Optimal Investment
100
15
The Cost
Quality Incidents
Qualityof
Costing
6
• The total number of quality incidents over a
two-year period: 54
• The cost of 21 quality incidents:
R 582.9 million
• Extrapolated quality cost for all incidents:
R 1.5 billion
Quality Costing and Lessons Learned on Projects
Marquardt, A.E.
B Eng (Hons) Aeronautical
Pr.Eng. (2013)
16
Claims Incurred by Disciplines
9
[CATEGORY
[CATEGORY
NAME] NAME]
[CATEGORY NAME]
1%
3%
[CATEGORY NAME]
1%
3%
[CATEGORY NAME]
2%
Total: R280 Million
2005 - 2014
[CATEGORY NAME]
40%
[CATEGORY NAME]
50%
Quality Costing and Lessons Learned on Projects
17
Notifications by Stage of Project
9
[CATEGORY NAME]
4%
[CATEGORY NAME]
16%
[CATEGORY NAME]
5%
[CATEGORY NAME]
50%
[CATEGORY NAME]
25%
Quality Costing and Lessons Learned on Projects
18
The Use of Quality Metrics
Quality Costing and Lessons Learned on Projects
19
Quality for Industry
Quality Costing and Lessons Learned on Projects
LESSONS LEARNED
QTRAC FOR BATCH
MANUFACTURING
QTRAC FOR MASS
MANUAFACTURING
The ultimate value of QTrac lies in the conversion
of Quality Costing to Lessons Learnt through an
integrated risk management system which
enables improved business and cost
management for companies, waste reduction
and continual improvement.
QTRAC FOR PROJECTS
BIE
QUALITY FOR
INDUSTRY
PLANNING AND COST ENGINEERING
20
Project Lessons Learned
Analyse quality and cost
reports
7
Adapt business
processes
Identify lessons
learned
Integrate risk
management
Quality Costing and Lessons Learned on Projects
21
Category Coding: PMBoK®
8
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Project Integration Management
Project Scope Management
Project Time Management
Project Cost Management
Project Quality Management
Project Human Resource Management
Project Communications Management
Project Risk Management
Project Procurement Management
Project Safety Management
Project Environmental Management
Project Financial Management
Project Claim Management
Quality Costing and Lessons Learned on Projects
Primary Code
Project
Management
Secondary
Code
Project
Integration
Management
Project Scope
Management
Tertiary Code
Tertiary Code
Project plan
development
PMT-INTG-1
Project plan
execution
PMT-INTG-2
Integrated
change control
PMT-INTG-3
Initiation
PMT-SCOPE-1
Scope planning
PMT-SCOPE-2
Scope definition
PMT-SCOPE-3
Scope
verification
PMT-SCOPE-4
Scope change
control
PMT-SCOPE-5
22
Lessons
and Best
Practices
System
Design
of aLearned
Lessons
Learned
System
Design
8
10. Graph Analysis
9. Coding Analysis Tertiary Count
8. Coding Analysis Secondary Count
Capture
Incidents
7. Coding Analysis Primary Count
1
6. Coding Count
Graphical
Results
3
5. Coding Detail
Define filter
parameters
4. Database
2
3. Operations Count
2. Filter Options
1. Notes
Quality Costing and Lessons Learned on Projects
23
Lessons Learned Trending Company A
Primary Code Analysis
9
Finance & Information
Management, 3.2%
Safety, Health &
Environment, 4.4%
Technical,
24.2%
Quality Costing and Lessons Learned on Projects
Site & Facilities
Management, 2.9%
Corporate Affairs, 2.1%
Project Management, 63.2%
24
Lessons Learned Trending Company A
Breakdown of Primary into Secondary
100%
9
90%
PMT-LEGL
PMT-STKH
TEC-CTRL
CAF-HOUS
PMT-PRMT
Percentage Contribution per Secondary Code
TEC-CNMT
80%
PMT-RISK
PMT-COMS
SHE-ENVT
TEC-GEOT
70%
60%
SFM-SITE
FIM-LOG
PMT-HR
50%
TEC-DSGN
PMT-QUAL
40%
30%
20%
10%
CAF-SOCT
FIM-SUPL
PMT-COST
SHE-SAFE
FIM-IM
PMT-TIME
PMT-SCOPE
SFM-EQP
FIM-CLAIM
TEC-DRWG
FIM-FIN
0%
PMT-INTG
Project
Management
Technical
Quality Costing and Lessons Learned on Projects
Site &Facilities
Management
Finance &
Information
Management
Safety, Health &
Environment
Corporate Affairs
25
20%
48
Quality Costing and Lessons Learned on Projects
43
41
39
25
0%
100%
91%
83%
75%
66%
58%
60%
60%
50%
98
40%
66
30%
38
21
Cumulative %
96%
Project
Integration
Management
70
Construction &
Management
20%
Drawings
34%
Project Cost
Management
48%
Project Quality
Management
40%
Construction
Project Scope
Management
80%
Project Time
Management
100%
Project
Procurement
Management
120%
Engineering
Design
Project Human
Resource
Management
Number of Occurrences per Code
Lessons Learned Trending Company A
Top-10 Secondary Code Analysis
9
100%
90%
80%
70%
20%
10%
0%
26
88%
27
10
81%
72%
64%
55%
24
Quality Costing and Lessons Learned on Projects
60%
64
50%
40%
20
23
23
22
19
18
0
15
Cumulative %
94%
Design Review
32
Competence,
Training &
Awareness
36%
Schedule
Control
46%
Scope
Planning
40
Procurement
Planning
50
Drawing
Accuracy &
Availability
60
Cost
Estimating
30
24%
Mechanical
Eng Design
70
Vendor
Management
Staff
Acquisition &
Availability
Number of Occurrences per Code
Lessons Learned Trending Company A
Top-10 Tertiary Code Analysis
9
100%
100%
90%
80%
70%
30%
20%
10%
0%
27
Lessons Learned Trending Company B
Primary (6M) Code Analysis
9
46.5%
32.3%
Man (Manpower)
Milieu (Environment)
Material
Measurement
Machine (Means)
Method
14.5%
0.6%
2.4%
3.9%
Quality Costing and Lessons Learned on Projects
28
Lessons Learned Trending Company B
Top-10 6M Secondary Code Analysis
9
100%
50
95%
90%
84%
78%
40
80%
68%
35
70%
57%
30
60%
25
45%
20
15
50%
40%
31%
30%
16.5%
10
20%
5
10%
Percentage anticipated improvement
45
Number of findings
100%
90%
0%
0
Skills/
Resources
Planning &
Scheduling
Component Workmanship
Malfunction
Quality Costing and Lessons Learned on Projects
Maintenance Management
Shortfall
Controls
Target
Date/Time
Spares
Availability
Behaviour/Di
scipline
Engineering
Functions
29
Preventive Measures
Administrative Technical
Controls
Controls
Primary
Barriers:
System
Controls
Behavioural
Controls
A
Incident
B
C
D
Secondary
Barriers
Quality Costing and Lessons Learned on Projects
Tertiary
Barriers
Procedure
PRO001
PRO002
PRO003
PRO004
PRO005
PRO006
PRO007
PRO008
PRO009
PRO010
PRO011
PRO012
PRO013
PRO014
PRO015
PRO016
PRO017
PRO018
PRO019
PRO020
PRO021
PRO022
PRO023
PRO024
PRO025
PRO026
Name/Description
Quality System Review
Control of Documents
Control of Records
Control and Disposition of Non-Conforming Product
Corrective/Preventive Actions
Quality Circles and Continual Improvement
Appointment of Chief Designer
Design Process Control
Query Notes
Process Planning and Approval
Control of Identification and Certification Stamps
First-Off Inspection
Manufacturing Method Proving and First Article Approval
Control of Special Processes
Serialisation and Identification of Parts and Assemblies
Protection and Preservation of Parts and Assemblies in Process
Inspection and Test Status
Rejection Note/Non-Conformance Report
Quarantine Store/Area
Material Review Board
Concession and Deviation Request
Root Cause Analysis
Scrap Disposal
Cost of Non-Conforming Product
Lessons Learned and Best Practices
Trending of Lessons Learned and Best Practices
30
Quality Costing and Lessons Learned
10
31
Thank you for
your attention.
Questions?
Quality Costing and Lessons Learned on Projects
32