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Designed to help those that are preparing to take the PMP or CAPM Certification Exam, each post within this series presents a comparison of common concepts that appear on the PMP and CAPM exams.
Cost of Conformance vs Cost of Non-Conformance
In preparing cost estimates for your project, always consider the quality costs: quality costs to build into a project while not building in quality also can cost money.. Some recent examples in the headlines: Toyota, some US egg farms, peanut butter processing plants, etc.
Cost of Conformance
The costs incurred while building in, or ensuring, quality are called the costs of conformance.
Costs of conformance can include activities such as process documentation, training, inspections, and audits. This is money spent to avoid failures.
These activities each consume resource hours and thus need to be included in your project schedule, resource assignments, and cost estimates.
Cost of Non-Conformance
However, if there is a choice made not to conduct quality activities, there is a potential for costs associated with any resulting problems. These costs are referred to as the costs of non-conformance. This is money spent because of failures.
Costs of non-conformance can include things such as payments made out on warranties, re-work or scrap, and/or damage to reputation.
It is easy to see that there is a potential correlation between the amount of money spent on conformance versus the cost implications of non-conformance.
Needless to say, the costs of conformance need to be appropriate for the product or project.
During our classes, we provide students with a simple, single-function calculator that is mass-produced and purchased in bulk. The cost of quality activities was probably somewhat low, given the mass production and low sales price.
However, our course materials adhere to the highest quality standards, which includes multiple reviews by subject matter experts, extensive test printing, the use of the highest quality paper within the course books, etc. This is all considered the cost of conformance as we have a very low tolerance for any type of non-conformance.
While cost of quality (conformance versus non-conformance) is generally referred to as a quality concept, it has implications to your project's triple constraint:
- Scope - all of the work required and documented for your project and include these quality activities.
- Time - quality activities take time and must be accounted for in your schedule
- Cost - resource time equals cost. Always remember that NOT doing quality activities can potentially lead to increased costs on the back-end.
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