eppm presentation_final

Quality Costing and Lessons Learned on Projects Port Elizabeth, South Africa

Hannelie Nel

5th International Conference on Engineering, Project and Production Management 27 November 2014

The BIE Group

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.

The BIE Value StatementBIE 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 2

BIE Group Global Footprint


Project Assurance

Quality Costing and Lessons Learned on Projects

FEL

LESSONS LEARNED

CLOSE-OUT

EXECUTION Identification of lessons

learned Cost of Quality

Supply chain management Contract management Quality control Cost and schedule control

Project close-out Business case close-out

Value creation Project review Quality assurance

4

Scope

2

1

3

4

5

7

6

8

9

Global Infrastructure Spending 2014 - 2025

The ASQ Global State of Quality 2013

Restructuring Activities of CEOs 2013

The Business Cost of Poor Quality

Quality Costing the PAF Model

Project Lessons Learned

The Cost of Quality Incidents

Design of a Lessons Learned System

Lessons Learned Trending

Preventive Measures10


The ASQ Global State of Quality 2013


“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

1

6

ISO 9001 Global Growth 1993-2011


200 000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 201120102009

400 000

600 000

800 000

1 000 000

1 200 000

19930

Middle East

Central and South Asia

East Asia and Pacific

Europe

North America

Central and South America

Africa

7

1

China India Brazil Russia South Africa

ISO Companies 328213 29574 28325 12663 3409

328 213

29 574 28 325

12 663 3 409

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

ISO 9001 Listed Companies BRICS


1

0.3% Global Listing

101 848

83 864 79 237

31 086

20 467

2 766 1 948 1 626 1 535 612 465 0

20 000

40 000

60 000

80 000

100 000

120 000

Basic metal &fabricated metal

products

Construction Electrical andoptical equipment

EngineeringServices

Informationtechnology

Mining andquarrying

Electricity supply Manufacture ofcoke & refined

petroleumproducts

Water supply Gas supply Nuclear fuel

ISO 9001 Companies per Global Sector


1

8.4% Global Sector

ISO 9001 RSA Companies


Basic metal, fabricated

metal products

Electrical, optical

equipment

Other services

Chemicals, products,

fibres

Transport, storage,

communication

Rubber, plastic

products

Machinery, equipment

Engineering services

Food products,

beverages, tobacco

Other transport

equipment

Wholesale, retail, trade,

motor vehicles

Concrete, cement, lime,

plaster

Construction

654

312295 281

185 182170 156

133 130122

56 55

0

100

200

300

400

500

600

700

10

1

0.01% Global Sector

Global infrastructure spending to reach $9 trillion by 2025


Source: Oxford Economics

Worldwide, capital project and infrastructure spending

is expected to total more than $9 trillion by 2025, up

from $4 trillion in 2012

Economic return generated for every dollar spent on a

capital project

11

Total Quality Costs may constitute 8% - 15% of total

construction costs.

3

Restructuring Activities of CEOs

Which of the following restructuring activities have CEOs initiated in the past 12 months?


Source: www.pwc.com – Capital Projects and Infrastructure 2013

12

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 cost-reduction initiative

Entered into a new strategic alliance or joint venture

Ended an existing strategic alliance or joint venture

0% 20% 40% 60% 80%

All CEOs

3

The Business Cost of Poor Quality


COST SCHEDULE

PROJECTMANAGEMENT

QUALITY

13

4 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.

The Business Cost of Poor QualityThe Business Cost of Poor Quality

• Safety and environmental implications due to non-compliance with statutory quality requirements.

• 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.

The Cost of Quality


4

Quality Costing the PAF Model

COST OF QUALITY SUMMARY REPORT BASED ON OPERATING EXPENDTURE

TIME PERIOD: MARCH 2007 – JULY 2010

Total Prevention & Appraisal Cost as % TQC 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%

TQC as a % of Operating Expenditure: 20%


Total prevention costs, R 97.3 million - 30%

Total appraisal costs, R 56.7 million - 18%

Total internal failure costs, R 77.7 million – 24%

Total external failure costs, R 88.8 million – 28%

Qu

alit

y C

ost

s (R

)

Internal and external failure costs

Prevention and appraisal costs

Total quality costs

0 100Quality of conformance (%)

Optimal Investment

5

Quality CostingThe Cost of Quality Incidents

• 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


Marquardt, A.E. B Eng (Hons) Aeronautical

Pr.Eng. (2013)

6

Claims Incurred by Disciplines

Structural 40%

Civil 50%

Mechanical 2%

Electrical 3%

Project Management 3%Fee Recovery 1%

Other 1%


9Total: R280 Million2005 - 2014

Notifications by Stage of Project

Design Stage 50%

Construction Stage 25%

Establishment of Site 16%

Incomplete Brief / Definition of Services 4%

Others 5%


9

The Use of Quality Metrics


Quality for Industry

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.


QTR

AC

FO

R P

RO

JEC

TS

QTR

AC

FO

R M

ASS

M

AN

UA

FAC

TUR

ING

QTR

AC

FO

R B

ATC

H

MA

NU

FAC

TUR

ING

LESS

ON

S LE

AR

NED

BIEQUALITY FOR

INDUSTRY

PLANNING AND COST ENGINEERING

20

Project Lessons Learned


Analyse quality and cost reports

Identify lessons learned

Integrate risk management

Adapt business processes

7

21

Category Coding: PMBoK®

1. Project Integration Management

2. Project Scope Management

3. Project Time Management

4. Project Cost Management

5. Project Quality Management

6. Project Human Resource Management

7. Project Communications Management

8. Project Risk Management

9. Project Procurement Management

10. Project Safety Management

11. Project Environmental Management

12. Project Financial Management

13. Project Claim Management

Primary CodeSecondary

CodeTertiary Code Tertiary Code

Project Management

Project Integration Management

Project plan development

PMT-INTG-1

Project plan execution

PMT-INTG-2

Integrated change control

PMT-INTG-3

Project Scope Management

Initiation PMT-SCOPE-1

Scope planning PMT-SCOPE-2

Scope definition PMT-SCOPE-3

Scope verification

PMT-SCOPE-4

Scope changecontrol

PMT-SCOPE-5


8

Lessons Learned and Best Practices System Design

Design of a Lessons Learned System

10. Graph Analysis

9. Coding Analysis Tertiary Count

8. Coding Analysis Secondary Count

7. Coding Analysis Primary Count

6. Coding Count

5. Coding Detail

4. Database

3. Operations Count

2. Filter Options

1. Notes

Define filter parameters 2

Capture Incidents 1

GraphicalResults 3


8

Lessons Learned Trending Company APrimary Code Analysis


Technical, 24.2%

Safety, Health & Environment, 4.4%

Finance & Information Management, 3.2%

Site & Facilities Management, 2.9%

Corporate Affairs, 2.1%

Project Management, 63.2%

24

9

Lessons Learned Trending Company ABreakdown of Primary into Secondary


CAF-SOCT

SHE-SAFE

FIM-FIN

SFM-EQP

TEC-DRWG

PMT-INTG

PMT-SCOPE

TEC-DSGN

SFM-SITE

FIM-CLAIM

SHE-ENVT

PMT-TIME

TEC-GEOT

FIM-IM

CAF-HOUS

PMT-COST

FIM-SUPL

PMT-QUAL

TEC-CTRL

TEC-CNMT

FIM-LOG

PMT-HR

PMT-COMSPMT-RISK

PMT-PRMT

PMT-STKHPMT-LEGL

Project Management

Technical Site &Facilities Management

Finance & Information

Management

Safety, Health & Environment

Corporate Affairs

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Per

cen

tage

Co

ntr

ibu

tio

n p

er S

eco

nd

ary

Co

de

25

9

Lessons Learned Trending Company ATop-10 Secondary Code Analysis


98

70 66

48 43 41 39 3825 21

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

20%

40%

60%

80%

100%

120%20%

34%

48%

58%

66%

83%

75%

91%96%

100%

Pro

ject

Hu

man

R

eso

urc

e M

anag

eme

nt

Engi

nee

rin

g D

esig

n

Pro

ject

P

rocu

rem

en

t M

anag

eme

nt

Pro

ject

Tim

e M

anag

eme

nt

Co

nst

ruct

ion

P

roje

ct S

cop

e M

anag

eme

nt

Pro

ject

Qu

alit

y M

anag

eme

nt

Pro

ject

Co

st

Man

agem

en

t

Dra

win

gs

Co

nst

ruct

ion

&

Man

agem

en

t

Pro

ject

In

tegr

atio

n

Man

agem

en

t

Cu

mu

lati

ve %

Nu

mb

er o

f O

ccu

rren

ces

per

Co

de

26

9

Lessons Learned Trending Company ATop-10 Tertiary Code Analysis


64

3227 24 23 23 22 19 18 15

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

10

20

30

40

50

7024%

36%

46%

55%

64%

81%

72%

88%

94%100%

60

Staf

f A

cqu

isit

ion

&

Ava

ilab

ility

Ven

do

r M

anag

eme

nt

Mec

han

ical

En

gD

esig

n

Co

st

Esti

mat

ing

Dra

win

g A

ccu

racy

&

Ava

ilab

ility

Pro

cure

me

nt

Pla

nn

ing

Sco

pe

Pla

nn

ing

Sch

edu

le

Co

ntr

ol

Co

mp

eten

ce,

Trai

nin

g &

A

war

enes

s

Des

ign

Rev

iew

Cu

mu

lati

ve %

Nu

mb

er o

f O

ccu

rren

ces

per

Co

de

27

9

Lessons Learned Trending Company B Primary (6M) Code Analysis

28Quality Costing and Lessons Learned on Projects

2.4%14.5%

0.6%

46.5% 32.3%

3.9%

Man (Manpower)

Milieu (Environment)

Material

Measurement

Machine (Means)

Method

9

Lessons Learned Trending Company BTop-10 6M Secondary Code Analysis


0Skills/

ResourcesPlanning & Scheduling

ComponentMalfunction

Workmanship MaintenanceShortfall

Management Controls

Target Date/Time

Spares Availability

Behaviour/Discipline

EngineeringFunctions

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

5

10

15

20

25

3557%

68%

84%78%

90%95%

100%

30

Per

cen

tage

an

tici

pat

ed im

pro

vem

ent

Nu

mb

er o

f fi

nd

ings

40

45

50

45%

31%

16.5%

9

Preventive Measures


Primary Barriers:

Administrative Controls

TechnicalControls

SystemControls

Behavioural Controls

Incident

Tertiary Barriers

Secondary Barriers

A

BC

D

Procedure Name/DescriptionPRO001 Quality System ReviewPRO002 Control of DocumentsPRO003 Control of RecordsPRO004 Control and Disposition of Non-Conforming ProductPRO005 Corrective/Preventive ActionsPRO006 Quality Circles and Continual ImprovementPRO007 Appointment of Chief DesignerPRO008 Design Process ControlPRO009 Query NotesPRO010 Process Planning and ApprovalPRO011 Control of Identification and Certification StampsPRO012 First-Off InspectionPRO013 Manufacturing Method Proving and First Article ApprovalPRO014 Control of Special ProcessesPRO015 Serialisation and Identification of Parts and AssembliesPRO016 Protection and Preservation of Parts and Assemblies in ProcessPRO017 Inspection and Test StatusPRO018 Rejection Note/Non-Conformance ReportPRO019 Quarantine Store/AreaPRO020 Material Review BoardPRO021 Concession and Deviation RequestPRO022 Root Cause AnalysisPRO023 Scrap DisposalPRO024 Cost of Non-Conforming ProductPRO025 Lessons Learned and Best PracticesPRO026 Trending of Lessons Learned and Best Practices

Quality Costing and Lessons Learned

31

10


Thank you for your attention.

Questions?

eppm presentation_final

Documents

projects quality

quality services

global sector quality

rsa companies quality

asq global state of

quality performance

projects fel lessons

system lessons