Cost of Quality: A Better Metric for Decision Making
By Definition Cost of Quality is (Prevention + Appraisal + Failure Costs)/ Total engineering Effort expressed in percentage.
Prevention Cost: All the efforts the team puts to prevent poor quality in product or services.
Efforts Spent on,
 Regular Team Meetings
 Quality Planning
 Trainings
 Quality Improvement Meetings
Appraisal Cost: “To appraise someone” is to assess something/ someone. So, Appraisal Cost is associated with measuring, evaluating or auditing the service or Product to ensure compliance with defined standards and requirements.
Efforts Spent on,
 Inspection and Review Efforts
 Testing
 Audits
 Efforts spent on Calibration of Equipment
Failure Costs: As the name says it is the effort associated with defects and the time to fix them. Internal Failure: Efforts spent in fixing the defects that were identified in internal reviews or QC team (Subjective to the Project). External Failure: Efforts spent in fixing the defects that were identified by the Customer.

The Below Table should give a rough Idea about how Cost of Quality is Influencing the
Project Total Engineering Effort Prevention cost Appraisal Cost Internal Failure cost External Failure cost Cost of Quality (%)
Project 1 1800 620 800 30 140 88.33
Project 2 3700 520 350 120 30 27.57
Project 3 700 70 35 10 0 16.43
• Assumptions: All three projects have same – No of resource, SDLC, Environment. Only the scope differs based on which the team estimated different Engineering efforts.
So, Looking at the table above, we can notice that Project 2 and 3 have a better planning and execution compared to Project 1.
 Project 1 has spent more on Prevention (Quality Planning, Trainings etc) and Appraisal (Testing, Reviews etc) yet there were more external defects compared to Internal. This gives a clear picture to the management that the efforts spent on Training and Testing were not useful or effective. This will be key decision making pointer for the management for future projects.

 Project 2 has cost of Quality (27.5 %) which in the range of 25 to 35 % - Industry Standard for IT SDLC full life cycle project. The team has spent sufficient efforts on Planning, training, Internal Reviews and Testing and hence the no of defects released to customer are very less or the efforts spent in resolving external defects are comparatively less.

 Project 3, which must be a small -limited period maintenance project looking at the estimate (Total Engineering Effort), has Cost of Quality (16.43 %) which is way below the industry standards.

Such a low Value for COQ is accepted?
 Yes, the third project hasn’t delivered any external defects and the scope of the project demanded minimum efforts for Prevention and Appraisal.
 There can be instances of High Cost of Quality (>45 %) also. A saturated maintenance project, with minimum changes to code but lot of code review to see impact will have more Appraisal cost but the Failure cost will be minimum. In this scenario it is acceptable to have high COQ %.
To conclude, most of the project management decisions can be taken with a detailed analysis done on Cost of Quality Metric.