According to the PMBOK Guide, specifically within the Plan Quality Management process, the Cost of Quality (COQ) is a critical tool used to ensure that the project deliverables meet the required standards. COQ is divided into two main categories: Cost of Conformance and Cost of Nonconformance.
Internal failure costs fall under the category of Cost of Nonconformance. These are costs incurred because the product or service does not meet quality requirements, but the deficiency is discovered before the product is delivered to the customer.
* Rework: The action taken to bring a defective or nonconforming component into compliance with requirements or specifications.
* Scrap: The cost of work or materials that cannot be repaired or used and must be discarded.
* Timing: Because these failures are found internally (by the project team or quality department), they are generally less expensive than external failures, but they still represent a waste of project resources and time.
* A. Inspections: These are Appraisal Costs (part of the Cost of Conformance). These are costs incurred to examine the work and ensure it meets requirements before a failure occurs.
* B. Equipment and Training: These are Prevention Costs (part of the Cost of Conformance). These are proactive investments made to keep errors from happening in the first place.
* C. Lost Business: This is an External Failure Cost. These costs occur when the product has already reached the customer and fails. Lost business, warranty claims, and damage to reputation are the most expensive types of quality costs.