ABSTRACT
Earlier studies on failure costs in construction have set their theoretical basis on quality management theory. This theory has provided different models by which failures costs are measured. In most studies the prevention-appraisal-failure (PAF) model has been considered. In such model prevention costs are those incurred to reduce, eliminate and prevent defects (errors); appraisal costs are those incurred to detect errors and to evaluate the quality of the work done. In the case of failure costs, these are divided into internal and external failure costs. Failures costs are all costs incurred that are necessary to correct products or process which fail to satisfy the quality specification (Hammarlund & Josephson 1991; Ledbetter 1994; Love et al. 1999; Barber et al. 2000; Hall & Tomkins 2001; Love et al. 2004; Love & Josephson 2004). Internal failure costs include those occurring before the delivery of the product including scrap, rework, retesting, time spent determining corrective action; and external failure costs are those occurring after the delivery of the product including costs of repairs, returns, dealing with complaints and compensation. Authors that have used thismodel formanaging failure costs have found some limitations of its applicability in the construction industry. The first limitation is the difficulty in estimating the prevention and appraisal costs for each project. The second limitation is that the focal point of analysis is set on the quality of the product and not on the process. The third limitation is that the management of failure costs is only done in a retrospective manner, which is after the event has actually occurred.
