Quality Assurance Strategy for 

Existing Homes: Final Quality 

Management Primer for High 

Performing Homes

M. Del Bianco, J. Taggart, J. Sikora, and 

A. Wood

NAHB Research Center

December 2012
NOTICE

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iii

Quality Assurance Strategy for Existing Homes: 

Final Quality Management Primer for High Performing Homes 

Prepared for: 

The National Renewable Energy Laboratory 

On behalf of the U.S. Department of Energy’s Building America Program 

Office of Energy Efficiency and Renewable Energy 

15013 Denver West Parkway 

Golden, CO 80401 

NREL Contract No. DE-AC36-08GO28308 

Prepared by: 

M. Del Bianco, J. Taggart, J. Sikora, and A. Wood

The NAHB Research Center Industry Partnership 

400 Prince George’s Boulevard 

Upper Marlboro, MD 20774 

NREL Technical Monitor: Stacey Rothgeb 

Prepared under Subcontract No. KNDJ-0-40335-00 

December 2012 
iv

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v

Contents

List of Figures ............................................................................................................................................ vi

List of Tables .............................................................................................................................................. vi

Definitions.................................................................................................................................................. vii

Executive Summary................................................................................................................................. viii

1 Introduction........................................................................................................................................... 1

2 Background........................................................................................................................................... 3

2.1 History of Quality Management Systems ..........................................................................3

2.2 Quality Management Systems in the Residential Construction Industry...........................3

2.3 Quality Management Systems in High Performing Homes...............................................4

3 Quality Basics....................................................................................................................................... 5

3.1 Quality Assurance and Quality Control .............................................................................5

3.2 Comprehensive Quality Management System ...................................................................6

3.3 Strategic Models.................................................................................................................7

3.4 Tactical Standards ..............................................................................................................8

3.5 Operational Tools...............................................................................................................8

3.6 Specifications .....................................................................................................................9

4 Quality in Residential Construction ................................................................................................. 10

4.1 Need for Quality in High Performing Homes..................................................................10

4.2 New Trade Contractors ....................................................................................................11

4.3 More Frequent and Involved Inspections.........................................................................12

4.4 New Materials and Methods.............................................................................................12

4.5 Tight Tolerances...............................................................................................................12

5 Value of Quality Management ........................................................................................................... 14

5.1 Total Cost of Quality........................................................................................................14

5.2 Total Cost of Quality—Example......................................................................................15

5.3 Value of Defect Prevention ..............................................................................................15

5.4 Financial Impacts of Quality ............................................................................................17

6 First Steps—Where To Start With Quality........................................................................................ 18

6.1 Step 1: Assess and Prioritize Company Needs.................................................................18

6.2 Step 2: Develop a Strategic Plan ......................................................................................20

6.3 Step 3: Create a Corporate Culture of Quality .................................................................20

6.4 Step 4: Implement Key Quality Management Elements..................................................20

6.4.1 Effective Inspections Processes.............................................................................20

6.4.2 Hotspot Implementation (Inspection Feedback)....................................................21

6.4.3 Effective Communication of Standards and Processes..........................................21

6.4.4 Achieve Outstanding Results Using Quality Performance Metrics.......................21

6.4.5 Effective Continuous Improvement Process..........................................................22

6.5 Step 5: Expand to Comprehensive Quality Management System....................................22

6.6 Step 6: Become Third-Party Certified..............................................................................23

6.7 Step 7: Apply for Quality Awards....................................................................................23

7 Conclusion .......................................................................................................................................... 23

References................................................................................................................................................. 25

Appendix A: Predesign Assessment ...................................................................................................... 26

Appendix B: Definitions of Common Quality Terms ............................................................................. 27
vi

List of Figures

Figure 1. Strategic, tactical, and operational layering of a QMS for an HPH........................................ 7

Figure 2. Greatest opportunities for builders......................................................................................... 10

Figure 3. Example COQ for a company before and after implementing a comprehensive QMS...... 15

Figure 4. The construction defect cost triangle..................................................................................... 16

Unless otherwise noted, all figures were created by the NAHB Research Center Industry 

Partnership.

List of Tables

Table 1. How Issues Are Addressed in Residential Construction Based on Company Level of 

Quality Management ............................................................................................................................ 6

Table 2. Example Comparison of Standard Construction to HPH Construction................................ 11

Table 3. Key Quality Management Tools ................................................................................................ 26

Unless otherwise noted, all tables were created by the NAHB Research Center Industry 

Partnership.
vii

Definitions

BA Building America

COQ Cost of quality

DOE U.S. Department of Energy

EERE Office of Energy Efficiency and Renewable Energy

FMEA Failure mode effects analysis

HPH High performing home

IAQ Indoor air quality

NHQ(A) National Housing Quality (Award)

QA Quality assurance

QC Quality control

QI Quality improvement

QMS Quality management system

TQM Total quality management
viii

Executive Summary

Building high performing homes (HPH) that are energy efficient, durable, comfortable, and safe 

to live in does not simply require knowledge of building science principles. It also requires the 

ability to properly design, specify, and install new technologies and systems. Quality 

management systems (QMS) provide the infrastructure necessary to ensure repeatability as well 

as manage continual improvement to increase first time quality, reduce warranty, and increase 

customer satisfaction. As a result, QMS is needed as the industry shifts from building 

conventional to HPH and ultimately state-of-the-art homes such those meeting the DOE’s 

Challenge Home.

This guide is designed to help a builder understand quality management and its role in 

transitioning from conventional to HPH building and remodeling. It addresses the typical quality 

management systems for new home construction, and also provides context for the use of quality 

management in existing homes. It explains what quality means, the value of QMS, the unique 

need for QMS when building HPH, and the first steps to a implementing a comprehensive QMS.
1

1 Introduction

Quality has been an industry buzzword for decades. Yet, quality management is not a fuzzy 

concept. Instead, it is a tried-and-true framework for delivering high quality products, on time 

and within budget. Companies who implement comprehensive quality management systems

(QMS) and obtain quality certification enjoy tangible, reproducible benefits such as increased 

profitability and higher customer satisfaction. Within a QMS, companies define standards of 

quality and create designs and procedures to meet those standards. Through the QMS process, 

companies focus on proactively preventing problems rather than reacting to crises.

1 Furthermore, 

although this report primarily addresses quality processes in new home construction, the goal is 

to address quality in existing homes using these same techniques to increase first time quality, 

reduce warranty, and increase customer satisfaction.

Although it was developed for the manufacturing sector, the QMS approach is not limited to 

industrial facilities. In fact, the approach can be broadly applied to any company that provides a 

product or service. Residential construction, however, presents unique challenges that increase the 

difficulty of ensuring a high-quality finished product. Unlike the typical factory setting—in which 

many identical products are assembled by employees working in a controlled environment—most 

homes are built on a jobsite in varying weather and site conditions, with trade contracted labor, and 

with very few identical products. This lack of repeatability and control over the production 

environment and training of workers confounds quality assurance. The interdependence of one

trade contractor’s work on the success of another trade contractor can also stymie the process. 

Further, the inspection process can create production delays and, thus, be viewed negatively. 

Despite the challenges, builders and remodelers stand to benefit greatly from implementing 

QMS—in large part because of the disproportional cost of correcting defects in a finished product. 

Industry-specific programs such as the National Housing Quality program are helping residential 

construction companies successfully implement sweeping QMS programs, which have been 

credited with dramatically improving product quality and economic indicators of success. 

Recent advances in building science, shifting consumer demands, and more stringent building 

codes are compelling more remodelers and builders to switch to constructing high performing 

homes (HPH). Impending code-mandated performance testing, as well as the prevalence of 

testing in energy and green building programs, is placing myriad demands on remodelers, 

builders, suppliers, design professionals, and trade contractors to meet tough performance 

specifications and lofty performance goals. These demands, in turn, are sparking renewed 

interest in QMS for the construction industry. As builders and remodelers strive to build HPH, 

QMS is emerging as a critical need for implementing complex, whole-house changes to the 

conventional design and construction processes. 

Although many companies have informal quality control mechanisms, a systematic and formal 

approach to quality is increasingly important for ensuring that HPH systems are designed and 

installed to meet strict tolerances and rigorous standards. A comprehensive QMS can address the 

 1 See www.toolbase.org/Best-Practices/Quality-Management/quality-management-high-performance-homes for 

more information. 
2

proper implementation of new products, materials, and construction techniques, and can ensure 

repeatability throughout a subdivision or region.

This document is intended as a primer for implementing quality management systems during the 

construction and remodeling of HPH. The key areas covered include the following: 

• Quality basics. This section defines quality and its commonly confused terms and 

explains the components of a formal quality management system (QMS). 

• Need for quality in HPH. The need for comprehensive QMS as the industry shifts 

toward HPH construction is established. 

• Value of quality management—economics of quality. This section demonstrates that 

delivering a poor quality product is much more expensive than delivering a high quality 

product. 

• First steps—where to start with quality. Because the process, at first, can seem 

overwhelming, this section describes how to get started with quality management.
3

2 Background

DOE’s Building America (BA) program fosters research and development into improving the 

energy performance, durability, quality, affordability, and comfort of new and existing homes. 

The ultimate goal of the program is to develop practical examples of cost-effective, energy 

efficient home building and remodeling solutions that increase comfort, safety, and durability 

across all U.S. climate zones. BA goals are being met by implementing a whole-house systems 

engineering approach and by uniting segments of the industry that traditionally work 

independently—such as architects, engineers, builders, remodelers, trade contractors, 

manufacturers, material suppliers, community planners, and mortgage lenders.

2.1 History of Quality Management Systems

Quality has evolved from informal inspections of finished products to the process-oriented, 

proactive, and formal method of continuous improvement that represents a QMS for today’s 

businesses. 

In the 19th century, the primary approach to quality was the inspection of a finished product. 

Quality activities started expanding in the early 20th century when, to reduce the cost of 

inspections, a scientist at Bell Laboratories began applying statistical methods to improve 

product quality and the efficiency of the manufacturing process. During World War II, the 

military’s demand for products meeting exacting specifications brought a rise in popularity to 

statistical quality control methods. When government contracts ended after the war, however, 

quality control measures were frequently abandoned.2

After World War II, Japanese corporations—seeking to quash their reputations for producing 

poor quality products—enlisted the help of American quality experts W. Edwards Deming and 

Joseph M. Juran. As these Japanese companies successfully improved quality and began to gain 

market share in the United States, American corporations responded by adopting quality 

improvement methods. During this time, firms adopted the statistical quality control methods 

developed at Bell Labs, but went further to implement total quality management (TQM) across 

the entire organization. The quality movement continued with the publishing of international 

quality standards (ISO 9000 series), the establishment of the Baldrige National Quality Program, 

and the launch of the Malcolm Baldrige National Quality Award. Since the end of the 1990s,

TQM has faded in name, but quality initiatives have continued to proliferate and mature with the 

expansion of ISO 9000 standards and the Baldrige award, and the development of alternative 

quality management systems such as Motorola’s Six Sigma.3

2.2 Quality Management Systems in the Residential Construction Industry

The typical residential construction process is substantially different from other types of 

manufacturing in that no two products are identical, conditions during assembly vary, and trade 

contractors (rather than manufacturer’s employees) usually perform most of the production work.

The changing conditions during assembly can include variability in the topography, weather 

(which can affect both the assembly process and the performance of installers), and significant 

 2 See www.asq.org for more information. 3 See http://www.motorola.com/Business/USEN/Training+Home/North+America+Training/North+America+Certifications/Lean+Six+Sigma+Certifications
4

variability in material properties of construction materials used (e.g., wood, concrete, fill).

Because of these unique challenges, there was historically no “one-size-fits-all” QMS for the 

industry, and quality programs were rare. Some early adopters, however, did embrace TQM, Six 

Sigma, and ISO 9000.

In 2004, recognizing the need for an industry-specific quality program, the NAHB Research 

Center established the National Housing Quality (NHQ) program which targets builders, trade 

contractors, and remodelers. In addition, the National Housing Quality Award (NHQA)4

was 

established to recognize residential construction companies that had successfully integrated 

QMS. In recent years, the increasing prevalence of these and other quality programs has 

contributed to the industry’s increased adoption of quality principles.

2.3 Quality Management Systems in High Performing Homes

Residential construction, in general, presents challenges to implementing quality management 

methods, but the construction of HPH confounds those challenges with more rigid specifications 

and increasingly critical construction details. When switching from conventional home 

construction to HPH, companies don’t simply need to develop new designs, specifications, and 

installation methods—they also need to ensure these specifications are implemented correctly by 

multiple trade contractors. Further, many trade contractors’ success depends on other trade 

contractors work to ensure the success of the house and ensure repeatability.

Recognizing that QMS are key to implementing change in any industry, the BA program 

established a quality assurance research and outreach program to support the home building and 

remodeling industry’s transition to HPH. Although BA team members have demonstrated that 

prototypes or even a few HPH can be built or remodeled using only quality control without a 

comprehensive QMS, the industry needs systematic QMS to adopt HPH methods on a larger 

scale to ensure repeatability. In addition, as houses are higher performing it is also important to 

address system interactions to ensure not only the energy performance, but also the durability, 

health, safety, comfort, and affordability of the house.

Quality activities under the BA program began with the development of high performance scopes 

of work for components of a HPH. This seminal work weaves HPH building specifications and 

procedures into the active management and implementation strategies of a comprehensive QMS. In 

addition, it addresses trade partnering and more continual monitoring, feedback, and control.

With the HPH scopes of work as the first step, the need for more HPH-specific quality management 

research became apparent. The BA program responded by establishing the Quality Working Group 

(QWG, now the Standing Technical Committee for Implementation Tools [STC-IT]), to provide 

leadership, structure, and support for BA quality research. These Building America Resources are 

available on the Building America web site,

5 Office of Energy Efficiency and Renewable Energy 

(EERE) publications6 site, and ToolBase.

7 Appendix A lists and describes specific resources. 

 4 See www.housingzone.com/professionalbuilder/nhqa and www.nahbrc.com/technical/awards/nhqa.aspx for more 

information. 5 See www.eere.energy.gov/buildings/building_america for more information. 6 See www.eere.energy.gov/library/default.aspx for more information. 7 See www.toolbase.org/quality for more information.
5

3 Quality Basics

Quality management is often misunderstood to refer simply to the inspection process. Yet, a 

QMS is much more involved. It encompasses the entire framework to define what should be 

built, designing to achieve these goals, and then constructing what is designed. In addition, it 

also addresses repeatability to ensure that the same house is constructed the same way every 

time. Defining the mechanisms and formalizing them into a comprehensive QMS helps 

businesses operate more efficiently. (Refer to Appendix B for a set of common construction 

quality terms and definitions). Builders transforming their practices from conventional to HPH 

construction can increase their chances of success by applying QMS principles to new 

techniques and technologies.

3.1 Quality Assurance and Quality Control 

Quality terms are often misused, which can lead to confusion. The two terms most often 

confused are quality assurance (QA) and quality control (QC). 

QA is a systematic process to improve business operations and increase customer satisfaction. It 

addresses both the quality of a finished product or service (the effectiveness of the operation) and 

the efficiency (costs and resources) of producing it. It is important to note that, in order for a 

business to be categorized as a high-quality operation, it must operate both effectively and 

efficiently. For example, a highly efficient construction operation that results in a home with 

numerous defects at closing, or a process that results in zero defects at closing, but which 

proceeds at an excessively slow rate or at a tremendous cost, is not considered a high quality 

operation. Examples of QA include developing construction documentation (e.g., drawings, 

specifications, scopes of work) with input from all relevant parties, training workers on proper 

installation techniques, and keeping the construction schedule on track. 

QA addresses overall improvement of business operations in the prevention of defects, and QC, a 

subset of QA, focuses on detecting and correcting product variance. Examples of QC include 

completing a job-ready checklist and performing inspections of installed work. 

Ultimately, the goal is to create a formal system that documents the structure, responsibilities, and 

procedures required to achieve effective quality management.8 QMS is a process-based approach to 

optimizing effectiveness, efficiency, and variance prevention. A QMS establishes the expectations of 

quality and the QA and QC processes to achieve those desired results. A company with an integrated 

QMS emphasizes creating highly satisfied customers and continually improving products. 

Table 1 presents an example of how issues are addressed by a company without formalized QMS 

compared to a company with a comprehensive QMS. 

 8 Adapted from the definition provided by the American Society for Quality, www.asq.org.
6

Table 1. How Issues Are Addressed in Residential Construction

Based on Company Level of Quality Management

No Formal Quality Management System

(Typical Construction)

Greater Quality Management

(Comprehensive QMS)

Corporate Culture of Quality

Finishing the job quickly is most important. Senior 

management does not create accountability to 

quality; there is no overall culture of quality.

Senior management values QA and is committed to 

its QMS, communicates this commitment, and 

holds all workers accountable in a corporate culture 

of quality.

Statistical Measurement of Performance Including Customer Satisfaction

Minimal tracking of statistics and minimal 

feedback for continuous improvement. Customer 

satisfaction is not a primary driver for 

improvement. 

Comprehensive feedback loops using statistics and 

lessons learned are consistently evaluated resulting 

in continuous improvement. Customer satisfaction 

is a primary driver for quality improvement. 

Company Quality and Financial Performance Results

Company financial (such as gross/net profits) and 

quality performance (such as callback ratios) are 

average.

Company financial (i.e., gross and net profits) are 

above industry average and quality performance 

(i.e., callback ratios) are below industry average.

Company Operational Policies and Procedures

Few policies and procedures are documented, they 

are not effectively communicated or monitored, 

and they are often not understood or followed.

Many policies and procedures are written, effectively 

communicated, and monitored to ensure that they are 

followed; procedures are typically followed.

Installation Process and Performance Standards and Tolerances

Inconsistent installation and no agreement for 

installation process and tolerances.

Consistent application and common agreement for 

installation process and tolerances.

Inspection Process and Feedback Loops

Ineffective, unstructured, or undocumented 

inspection process with minimal or ineffective 

feedback loops.

Effective, structured, and documented inspection 

process with effective feedback loops for 

continuous improvement.

Design Process

Design planning process is minimal or ineffective 

with minimal feedback loops.

Comprehensive design and planning process with 

feedback loops from all relevant parties.

Specifications

Specifications are minimal, incorrect, or unclear 

and often undocumented.

A detailed process is used to develop and document 

clear and detailed specifications.

Application of Building Science

Understanding of local, state, and federal energy 

codes.

Thorough understanding of building science 

applied to design and construction process.

Material Selection and Approval

There is no clear material approval process, and no 

or ineffective material inspection.

There is a detailed material selection and approval 

process and material inspection.

Installer Skills and Training

Unskilled and/or untrained labor with little 

accountability for results.

Labor is trained and held accountable to 

performance standards.

3.2 Comprehensive Quality Management System

Quality management has the most effect when strategically coordinated, driven, and aligned 

throughout the organization. A QMS starts with a corporate vision and strategy for quality. It 
7

proceeds with the development of a framework for delivering the QMS, which includes operational 

tools to use in the process. A comprehensive QMS has, at its foundation, the specifications and 

standards to which product quality must adhere. Having a QMS is essential to the industry’s ability 

to correctly and cost effectively implement advanced building science principles.

The conceptual model of a comprehensive QMS for HPH is presented in Figure 1. 

Figure 1. Strategic, tactical, and operational layering of a QMS for an HPH

In simple terms, the strategic model is the overall QMS for a company. Tactical standards

represent the framework for meeting quality standards. Operational tools refer to the 

documentation for ensuring quality control, and specifications are the requirements that must be 

met in order for the final product to meet quality standards. Following is a description of each of 

these key areas of a comprehensive QMS. 

3.3 Strategic Models

At the top of the pyramid is the quality vision for the company. Typically defined by senior 

management, the quality vision serves as the driving force for the company’s QMS. This 

corporate vision for a quality program is essential to the success of any QMS because 

commitment from top executives compels a corporate culture of valuing quality. 

At this strategic level, companies begin by self-assessing current QA and QC practices to 

identify gaps and define strategies for eliminating those gaps (refer to Section 6 for more details 

on this process). Leaders identify longer-term goals and allocate resources for the quality 

Strategic Model

Quality Vision

(NHQA/Baldrige 

Assessment)

Tactical Standards

Framework for Quality 

Assurance

(ISO-based QMS Builder 

Certification)

Operational Tools

Detail Quality Control

(DMAIC (Six Sigma), Flowcharting, 

Scopes of Work, Action Plans, Kaizen)

Specifications

Best Practices

(Building America)
8

improvement process. Self-assessment is the springboard for companies to decide how to focus 

resources toward the successful implementation of a QMS. 

3.4 Tactical Standards

Tactical standards are the actions and the documentation that serve the strategic purpose of the QMS; 

they provide the framework for implementing a QMS. Programs such as the NAHB Research 

Center’s NHQ Certified Builder, NHQ Certified Trade Contractor, and NHQ Certified Supplier 

programs9 (based on ISO 9000, ISO 14000, and OSHA 18000) and other residential quality 

programs and consultants such as BuildIQ,

10 Business Excellence Consulting,11 First Time 

Quality,

12 and Quality Built13 help the home building industry create this framework by setting 

industry-tailored criteria for quality, safety, and environmental management. The more generic ISO 

9000 certifications can also be adapted by construction firms, suppliers, and product managers.

At the tactical level, builders, remodelers, and trade contractors usually start by developing a 

quality manual that describes the organization’s policies, procedures, and documents necessary 

for implementing a comprehensive QMS. Where applicable, a quality manual references 

supporting documents such as codes and standards, HPH criteria (e.g., Builder’s Challenge 

Quality Criteria), specifications, scopes of work, and installation instructions. 

The development of a quality manual can be facilitated by a certification process or through a 

quality consultant. During this process, companies must demonstrate a QMS that affects the entire 

company—from scheduling and billing to jobsite inspection and trade contractor partnering, using 

sample documents to guide the process. A sample quality manual is available online.

14

3.5 Operational Tools

Operational tools facilitate the quality process. They are the tools used by the company and others, in 

the office and at the jobsite, to ensure that quality standards are met. The NAHB Research Center and 

other BA teams have developed many tools, specific to the home building industry, to support 

quality improvement while transitioning from conventional to HPH construction techniques. 

Some operational tools are process-oriented, such as: 

• 6-Sigma process. A process designed to eliminate defects (i.e., any process output that 

does not meet customer specifications)

• Process mapping. An activity to define what a business entity does, who is responsible, 

to what standard a process should be completed, and how to determine the success of the 

process

• Value stream mapping. A technique used to analyze and design the flow of materials 

and information required to bring a product or service to a consumer

 9 See www.nahbrc.com/builder/quality/index.aspx for more information. 10 See www.buildiq.com/ for more information. 11 See www.businessexcellenceconsulting.net/ for more information. 12 See www.firsttimequality.com/ for more information. 13 See www.qualitybuilt.com/ for more information. 14 See www.toolbase.org/Best-Practices/Quality-Management/sample-builder-quality-assurance-manual for more 

information.
9

• Failure mode effects analysis (FMEA). A procedure to determine the potential failure 

modes within a system for classification by the severity and likelihood of the failures

• Design FMEA, the application of FMEA to the design 

• Process FMEA, the application of FMEA to the construction process to consider 

process-induced failures

• Fishbone chart. A diagram used in defect prevention to identify potential factors causing 

a specific event 

• 80/20 rule. A principle stating that, for many events, roughly 80% of the effects come 

from 20% of the causes

• Brainstorming. A technique to find a conclusion for a specific problem by gathering a 

list of ideas spontaneously contributed 

• Error proofing (“poka yoke”). A mechanism to eliminate product defects by 

preventing, correcting, or drawing attention to human errors as they occur.

Others are tools for inspection and documentation of quality, such as: 

• Comprehensive design documentation (construction drawings, specifications, etc.)

15

• Scopes of work (detailing trade work and specifications)

• Procedure documents (“how to” manufacturer installation instructions, etc.)

• Hotspot training (address recurring issues)

• Satisfaction surveys (determine customer satisfaction).

Many sample operational tools for building HPH can be found at www.toolbase.org/quality. 

3.6 Specifications

At the foundation of the quality pyramid lies specifications—the exact requirements that need to 

be met during construction. Just as a QMS can support the construction of a conventional home 

based on conventional specifications, the strategic, tactical, and operational levels of QMS 

support the effective design and implementation of HPH specifications. It is these HPH 

specifications and the enhanced performance goals for the final product that set an HPH QMS

apart from a standard QMS for a code minimum home.

When selecting climate-appropriate specifications for HPH, the BA Best Practices series provides 

an excellent starting point16. Other resources include energy and green building program criteria, 

building codes, industry trade association best practices, and green building consultants. 

 15 See http://apps1.eere.energy.gov/buildings/publications/pdfs/building_america/strat_guide_constr_doc.pdf for 

more information.

16 See http://apps1.eere.energy.gov/buildings/publications/pdfs/building_america/36960.pdf
10

4 Quality in Residential Construction

The benefits of QMS—such as measured higher customer satisfaction, lower defect costs, 

reduced warranty costs, fewer employee injuries, and higher profitability—have been well 

documented in the manufacturing sector. The residential construction industry, despite being 

presented with unique challenges when implementing QMS, has also documented beneficial 

impacts (e.g., Rosenfeld, 2009; McIntyre and Kirshenman, 2000). 

The need for quality improvement is recognized in the industry. In a survey of the biggest 

opportunities facing the largest companies in home building, Professional Builder magazine 

ranked operational efficiency at the top of the list and better product marketing and services at 

third as shown in Figure 2. 

Professional Builder. Reprinted with permission.

Figure 2. Greatest opportunities for builders

4.1 Need for Quality in High Performing Homes

As the home building industry shifts its methods, either by choice or by increasingly stringent code 

requirements, toward high performance standards, there is a tremendous need for systems that can 

help successfully implement those changes. The industry has, historically, experienced difficulty 

with the effective and efficient construction and renovation of code-minimum homes. Therefore, it 

is not surprising that there will be even greater challenges as the industry strives to meet the higher 

standards for energy efficiency, durability, indoor air quality (IAQ), and comfort of HPHs.

When implementing any product change, it is imperative to do so in a highly efficient and 

effective manner such that changes are implemented properly and delays are avoided while 

profitability is maintained. QMS provide the necessary framework for effecting product 

improvements with minimal disruption. 

HPH construction involves upgrading specifications and installation methods and often introducing 

new products, trade contractors, or inspections. Often, HPHs have a much greater reliance on 

interdependent and interrelated systems; for example, the thermal enclosure performance affects 

the effectiveness of a minimized space conditioning system to deliver comfort to the occupant.
11

These changes are the type of product improvements that a QMS is geared for accommodating. For 

small companies, a formal QMS system has historically been unnecessary because the hands-on 

approach of the construction company owner grants a high level of control over the construction 

process. Yet, applying HPH to typical construction standards, quality assurance systems can assist 

with progressive change even in small-scale production. Table 2 outlines some examples of the 

challenges inherent in designing and constructing HPH. 

Table 2. Example Comparison of Standard Construction to HPH Construction

Standard Construction HPH Construction 

Design Phase

Simple design process to meet code 

minimums; standard for contractors.

Integrated design process involving numerous 

trade contractors for improving energy 

efficiency and performance with regard to 

moisture, durability, and IAQ. 

Building envelope air sealing meets code 

minimum.

Building envelope is designed to reduce air 

infiltration as much as possible.

No whole-house ventilation needed because 

there is significant air infiltration and 

exfiltration.

Because of tight construction, whole-house 

ventilation needed to enhance indoor air 

quality.

Designs are done by specifying and 

purchasing products without emphasis on 

how the house functions as a system.

A whole-house design process is needed to 

integrate and coordinate highly interdependent 

systems.

Single or small design team with minimal 

input from trade contractors.

Design process must involve consideration of 

multiple trades, best done with direct input and 

review by key trade contractors.

Construction Phase

Installers adopt new products, materials, and 

technologies more slowly.

Installers must learn to install new products, 

materials and technologies quickly.

Installers require no change in mindset; 

installation continues as before.

Installers must install products properly and 

must modify and adapt installation per new 

products and installation procedures.

Inspection, Verification, and Performance

Must meet code minimums. Must meet code and high performance 

specifications.

Usually no performance/diagnostic testing. Often tested for air infiltration, duct leakage, 

and insulation installation.

Visual inspection by code official, and 

contractor and homeowner.

Same as typical construction, but also often 

more involved third-party energy efficiency or 

green certification inspection.

4.2 New Trade Contractors 

An HPH may require additional trade contractors to design the ventilation system or to install a 

PV system or air sealing measures. Adding trade contractors, and associated inspections, can 

create a domino effect with other trades or the construction schedule. A QMS can ease the 

transition by setting expectations, identifying installation procedures and scopes of work for new 
12

contractors, and creating a system for including the new contractor without disrupting the 

construction schedule and other trade contractors’ work. 

4.3 More Frequent and Involved Inspections

In addition to code inspections, HPH are subject to performance testing and inspection by thirdparty energy efficiency or green certification personnel. These inspections typically verify

installation details with rigorous standards, specifications, and other criteria. During these 

inspections, the home is often subject to performance testing (such as infrared thermography, 

pressure imbalances, infiltration, and duct leakage tests) that can verify that performance 

standards are met more accurately than a visual inspection. 

Not only is the home required to perform better than code minimum in these inspections, but also the 

builder must build additional inspection time (and resources) into the HPH construction process. The 

transition to HPH may represent a significant update for design and construction specifications.

Because third-party testing happens after the installation, it can be used as a additional feedback 

mechanism in the hotspot process whereby defects are identified, brought to light, and corrected.

4.4 New Materials and Methods

To improve performance, remodelers and builders often use new products and materials that 

require new installation or application techniques. Contractors must be trained on these 

techniques, and be informed about how new procedures affect other design and construction 

activities. For example, installing rigid pipe versus semi-rigid pipe (e.g., crosslinked 

polyethylene) requires different tools, connection techniques, layout, and allowances for 

clearances because of thermal expansion and contraction. QMS systems put the processes in 

place for contractors and installers to learn how to properly install myriad new products to 

achieve the desired results. One method of ensuring that a new product or process is used 

correctly is through a production pilot program to identify any required changes to the process to 

maintain the desired quality control. In addition, the pilot program process should encompass the 

entire construction process from design through control.

4.5 Tight Tolerances

When builders and remodelers transition to high performing designs, they must meet increasing 

performance goals and customer expectations for energy efficiency, durability, IAQ, and 

comfort. To achieve this, houses must be designed and constructed using a systems approach in 

which the components of a home interact and function together as a system. Failure to carefully 

consider and calculate these interactions results at best in an underperforming house and at worst

in expensive lawsuits, damaged reputations, and ruined businesses. 

The combination of increased performance specifications, enhanced performance evaluation 

tools and testing, and the resulting tighter building envelopes and potential negative effects of 

systems interactions make designing and constructing HPH much more challenging than 

conventional code minimum home building. For example, building a tight duct system that 

achieves the proper airflow for comfort in each room requires careful duct design and 

installation. Therefore, extra steps such as air balancing and duct leakage testing ensure that 

installation was accomplished according to design in the HPH. In conventional practice, 

deficiencies in the installation result in a costly service call that could have been avoided. 
13

To ensure that an HPH performs as expected, extra steps are needed, like procedures and 

measures of a quality manufacturing and construction process, during the design phase and 

throughout construction to meet the performance goals and customer expectations. By providing 

the procedures, scopes, and tolerances for any job, and the tools for overseeing the successful 

completion of that job, a QMS can greatly increase the likelihood of a high performance finished 

product and greatly diminish the chance for defects and performance issues. 
14

5 Value of Quality Management

Although there are costs associated with implementing a quality management system, the cost of 

producing a poor quality home—with associated callbacks, warranty claims, and lack of customer 

confidence—is often far greater than the cost of producing a high quality home using a QMS. 

A large body of research gives ample evidence of the positive effect that quality programs have 

on businesses, as summarized in a previous NAHB Research Center report (NAHB Research 

Center, 2010). The most tangible effect of implementing a QMS, however, may be a lower total 

cost of quality—with several organizations reporting significant savings after implementing 

QMS (NAHB Research Center, 2010). 

5.1 Total Cost of Quality

The classical cost of quality (COQ) states that the cost of producing a high-quality product or 

service is the sum of the costs of prevention (P), appraisal (A), and internal failure (IF) and 

external failure (EF).

Total COQ = P + A + IF + EF

Prevention refers to activities that prevent poor quality (e.g., scopes of work, specifications, 

standard procedures, job ready forms); appraisal is the verification and evaluation process (e.g., 

inspections, checklists); internal failure refers to a defect during the construction process (e.g., 

resulting in rework) prior to homeowner occupancy; and external failure is a defect after the 

product is complete and has been received by the customer (e.g., warranty callbacks).

A study based on a survey of 208 construction firms, including home builders, in the Midwest, 

concluded that substantial economic benefits can be attained by implementing a QMS. The

findings suggest a correlation between the amount of total annual expenses dedicated to QMS 

and construction quality. Overall, contractors who reported spending the most resources on 

quality management reported a significant increase in product quality and customer satisfaction 

after implementing a QMS program (McIntyre and Kirschenman, 2000).

There can, however, be a point of diminishing returns in which one more dollar spent on prevention 

and appraisal will not result in bottom line savings. Although there is some uncertainty, one 

construction industry report found an optimal level of investment in preventing defects of between 

2% and 4% of revenue (Rosenfeld, 2009).
15

5.2 Total Cost of Quality—Example

Figure 3 compares the COQ at a hypothetical company before and 

after implementing a QMS (Cokins, 2006). The left-hand side 

shows the typical quality management process in which errors are 

corrected after they have occurred. The right side shows the COQ 

after the company has implemented a QMS. In both cases, the 

company invests in prevention and appraisal and incurs costs 

because of internal and external failure. For this sample business, 

however, after implementing a QMS (which nearly triples the 

prevention and appraisal costs), the total COQ is cut nearly in 

half—a value that is echoed by other real-world case studies 

showing a 25% to 65% reduction in total COQ (Cokins, 2006).

Figure 3. Example COQ for a company before and

after implementing a comprehensive QMS

As Figure 3 illustrates, companies without effective QMS spend 

the bulk of their quality budget on correcting defects after the 

product is complete—a practice that can be detrimental to a 

company’s reputation and, hence, negatively affect sales. After 

implementing a comprehensive QMS, the same example 

company, by investing in defect prevention and inspections 

(bringing the cost of prevention and appraisal to $8,000 from 

$3,000), is rewarded with fewer defects and substantially lower 

costs for correcting failures. 

5.3 Value of Defect Prevention

Another way to examine the importance of prevention and 

appraisal is to consider the cost to correct defects—which, 

according to a study of 63 manufacturers, makes up 70–80% of 

PC = prevention cost; 

AC = appraisal cost;

IFC = internal failure cost;

EFC = external failure cost

Cost of Poor Quality Cost of High Quality
16

the total cost of quality (Rodchua, 2009). As Figure 4 illustrates, the cost to fix a defect varies 

greatly according to when the defect is identified and corrected. The example, from the 

American Construction Insurance Group, is based on an 18-year average construction defects 

claim of $124,000 and the generally accepted rule of thumb that a $1 investment in preventative 

quality management yields somewhere between a $10 to $100 return. Using this example and 

tracing the cost of addressing defects from least cost (i.e., prevention in the design stage) to 

highest cost (i.e., paying a construction defect litigation claim), the financial advantage of 

investing in prevention and appraisal becomes apparent (American Construction Insurance 

Group, 2009).

There are other advantages to early prevention and correction. Workers can feel more satisfied 

when quality issues are approached proactively rather than reactively as crises. Further, because 

customers see fewer defects in the final product, customer satisfaction is higher, the builder’s 

reputation is improved, and referral rates are likely to perk up.

Figure 4. The construction defect cost triangle

© 2009 American Contractors Insurance Group. Reprinted with permission.

The $124,000 Rule of Construction Defect Claims

If Average Claim Is $124,000

Catching and fixing 

problems in the design 

Catching and fixing problems 

or errors in the work area

Catching and fixing problems or 

errors internally, but after they 

have left the work area 

Repairing all the possibilities 

of a construction defect 

claim while adding in 

attorneys’ fees on both sides 

of the claim

Repairing the damage of 

problems or errors caught 

by external customers

$12,400

$1,240

$124

$12.40

$124,000

Prevention Stage

Internal Failure

External Failure

Construction

Defects

Design Stage
17

The example is supported by several studies investigating the cost of defects in residential 

construction.17 In a study of 32,000 residential construction projects, Australian researchers 

found the cost of defects to be 4.1% of contract value (Mills et al., 2009), which aligns well with 

other construction industry cost analyses of 2 to 6% (Josephson and Hammarlund, 1999. A 2006 

study of nearly 32,000 homes supports these data, revealing the average cost to correct defects in 

new single-family homes to be $5,400 (Quality Built, 2006).

When analyzing data by type of builder, Mills et al. (2009) found that defect costs for the top 20 

builders (by volume) were about half those of the industry mean. The researchers conclude that, 

“the top 20 firms appear to be significantly better than those constructed by other 

builders...because they are better organized, and have a more professional approach to quality 

management.”

5.4 Financial Impacts of Quality

There is a compelling relationship between implementing a comprehensive QMS and a 

company’s bottom line. The NAHB Research Center’s NHQ program has recorded remarkable 

results from home building companies that have implemented quality management systems. A 

survey of the NHQ program18 revealed that, after achieving NHQ certification: 

• 80% of trade contractors reported a reduction in callbacks

• 88% achieved an increase in employee accountability

• 79% improved relationships with builders

• 65% overall improved their bottom line

• 70% of builders improved their bottom line

• 75% reported a reduction in callbacks and improved relationships with trades

• Trade contractors reported up to 25% reduction in cycle time.

Further, NHQA winning builders have noted tremendous effects from implementing QMS. A 

sampling of results includes: 

• 98% homes zero defects at closing, net profit increased 9% (Grayson Homes, Maryland)

• Reduced cycle time by 15% (Pringle Homes, Florida)

• 95% of trades list builder as the best to work for (Estes Homes, Washington)

• 33% of homeowner recommendations resulting in sale (TS Lewis, Arizona). [NAHBRC, 

2010]

Finally, a 1997 NAHB study reported the average builders’ net income before taxes was 5.1% 

and gross margin was 18.5%; NHQA builders, on the other hand, achieved an average net 

income of 11.2% and gross margin of 25.5%.19

 17 Although the stage of defect correction (e.g., internal or external failure) is not known from these studies, it is 

assumed that a combination of external and internal failure contributes to the reported costs.

18 http://gbgreview.nahbrc.net/news/pressreleases/rc_20070207b.aspx 19 See http://www.toolbase.org/Best-Practices/Business-Management/Bottom-Line-Quality
18

6 First Steps—Where To Start With Quality

For a company switching from conventional to HPH construction, introducing a new QMS can 

seem overwhelming. Yet, a QMS is precisely the mechanism needed to effect change within an 

organization and to ensure that new HPH specifications are done right. 

This section details the first steps for implementing a comprehensive QMS. These steps have 

been effective for many residential construction companies and trade contractors. Note that not 

all steps must be followed in order; the sequence can be modified to fit a company’s needs. In 

addition, many companies also use a quality consultant to assist in this process.

Some of the key steps to implementing an effective quality management system include the 

following: 

1. Assess and prioritize company needs. Assess where the company is on the quality path. 

Prioritize quality improvement activities.

2. Develop a strategic plan. Appreciate the value proposition of quality management and 

understand the basic quality concepts. Give longer-term direction to the quality program 

and identify resources to be allocated in pursuit of the strategy. 

3. Create a corporate culture of quality. Starting with top management, become 

committed to quality management; foster a culture of quality throughout the company.

4. Implement quality improvements. Adopt quality management tools and techniques

from an assessment of current designs and processes.

5. Expand to comprehensive QMS. Develop and implement a company-wide QMS.

6. Become third-party certified. Achieve third-party quality certification.

7. Apply for quality award. Be recognized; use awards as a marketing tool. 

The success of these steps is measured by increasing first time quality, reducing warranty 

callbacks, and increasing customer satisfaction. The intent of these steps is to show that there are 

multiple starting points for implementing quality management depending on the company. Out 

of these steps, step 1 is most often the best place to start because it helps create a plan for quality.

In addition, while it is not necessary to have third-party certification (step 6) or to apply for an 

award (step 7), some companies have found the structure of a program or award to be an easy 

start for quality.

6.1 Step 1: Assess and Prioritize Company Needs

As with any big task, QMS is easier to tackle when it is divided into a set of smaller, 

accomplishable tasks. To determine what these smaller tasks will be, companies must honestly 

assess the degree to which quality management is implemented throughout the organization. This 

process, called “gap analysis” by quality experts, identifies needs for quality improvement 

throughout the organization. 

Self-assessment can be a daunting process, and companies without a formal QMS process vary 

greatly in their level of existing quality processes. A widely accepted approach to this assessment 

is to do a formal, written gap analysis of current business practices. The gap analysis can be 
19

accomplished internally, but often a company adopting quality management will use a consultant 

to facilitate the process. Regardless of who conducts the analysis, input is needed from all 

relevant personnel to obtain the greatest accuracy and comprehensiveness. Because this process 

involves everyone in the organization, this first step can help cultivate a culture of quality. 

Two resources available at www.toolbase.org/quality, the NHQ Certified Builder Program Gap 

Analysis and the Gap Analysis for In-house Design, Design Centers, Escrow Departments, Land 

Development Operations, and In-house Mortgage Financing, can help a builder assess the degree 

to which company operations adhere to quality standards outlined in the NHQ builder 

certification requirements. Though developed for new home builders, these gap analysis tools 

can be modified slightly by remodelers and trade contractors to assess opportunities for quality 

improvement across the major functional areas of a company’s operations.

20

Another useful resource is the NHQA application and self-assessment tool.21 The NHQA

application is, essentially, a self-assessment tool. It can be used to help align resources, improve 

communication, increase productivity, boost effectiveness, and achieve strategic goals. The eight 

categories for the NHQA and the questions that can guide the process of self-assessment are as 

follows:

1. Leadership. How do company leaders guide the organization toward a common purpose 

of quality based on shared values and priorities? Do leaders’ actions reflect the vision for 

quality? How do leaders communicate the vision throughout the organization? 

2. Strategic planning. How does the company create and implement a strategic plan to 

achieve a vision for the future, enhance competitive position, and improve overall 

performance?

3. Performance management. How does the company develop, manage, measure, and 

improve processes to achieve performance excellence?

4. Customer satisfaction. How does the company manage the design and delivery of 

products and services that promise a high level of customer satisfaction?

5. Human resources. How do employee selection and development practices, as well as 

staff performance management, well-being, motivation, satisfaction, and compensation,

contribute to the growth of the organization?

6. Construction quality. What methods does the company use to drive quality in the home 

construction process and ensure high performing, trouble free products and services?

7. Trade partnerships. How does the company create high performance relationships with 

its independent trade partners?

8. Business results. What are the tangible business benefits resulting from high 

performance practices in the financial, operational, customer satisfaction, and product 

and service quality areas?

 20 See gap analysis links at 

www.toolbase.org/Best-Practices/Quality-Management/nhq-gap-analysis and www.toolbase.org/BestPractices/Quality-Management/example-requirements-gap-analysis for more information. 21 See NHQA application at 

www.housingzone.com/sites/default/files/2011%20NHQ%20Awards%20Application%20.pdf for more information.
20

After an initial gap analysis is complete, a company prioritizes opportunities for improvement. 

Prioritizing is crucial, because one of the most common barriers to starting an effective QMS is 

trying to implement too many new improvements at once. Although larger companies might be 

able to initiate multiple improvements simultaneously, smaller companies most likely will need 

to start with only one improvement and undertake others incrementally. In addition, there are 

numerous other quality management resources available from industry-recognized programs and 

experts.

22

6.2 Step 2: Develop a Strategic Plan

A quality oriented company must have a strategic plan representing the leadership’s vision for 

quality. This process addresses questions such as: “What is the longer-term vision for the 

company?” and “Where does the company want to be in five years?” After long-term vision and 

goals are established, company leadership develops a strategy for implementation. 

The strategic plan might include using NHQ certification requirements or ISO 9001 requirements 

to develop a comprehensive QMS. Another approach might be to implement some key elements 

of a QMS for rapid impact, and over time complete the development and implementation of a 

comprehensive QMS. 

6.3 Step 3: Create a Corporate Culture of Quality

The creation of a culture of quality begins with a commitment from company executives and 

flows to everyone who works for the company, including trade partners. It is essential that each 

person has a thorough understanding of the expectations of quality and a commitment to 

adhering to standards and procedures in order to produce quality products. For a culture of 

quality to exist at a company, quality must be reinforced at every opportunity. Once a culture of 

quality is successfully established, developing and implementing quality management processes 

and tools is made simpler. Having a corporate commitment to quality is considered an essential 

factor for the successful implementation of quality management strategies.

6.4 Step 4: Implement Key Quality Management Elements

Every aspect of a QMS is important, but certain elements stand out as essential and highly 

impactful. Sometimes, early implementation of key quality strategies can yield immediate results 

and help a business owner build momentum and support for the quality management concept 

from employees and trade contractors. Key elements of a QMS that can affect a company 

quickly include the following. 

6.4.1 Effective Inspections Processes 

A remodeler or builder with a fully implemented QMS has well-defined inspection processes, 

internal audits, performance metrics, satisfaction surveys and other tools that ensure multiple 

feedback loops. The common purpose of these tools is to continually improve the production 

process, reduce errors, and increase efficiency (produce higher profits). 

The inspection process needs to be well defined and documented, with critical inspection criteria 

selected with input both from installers and inspectors. Inspection checklists should be well laid 

out and easy to use, and should not be too long. Some good examples of inspection checklists 

 22 For example, ASQ, TQM, Six Sigma, Lean Construction, and ISO 9000.
21

can be found in the high performance scopes of work located under Best PracticesScopes of 

Work on www.toolbase.org23

6.4.2 Hotspot Implementation (Inspection Feedback)

A hotspot is a recurring issue that is identified by reviewing inspection checklists. By 

systematically reviewing inspection documentation, hotspots can be identified. This feedback is 

a major benefit of the inspection process. 

After hotspots are found, root causes can be identified and adjustments made to prevent 

recurrence. The NAHB Research Center’s Hotspot Implementation Guide and Tools aids the 

process of assessing, identifying, and preventing recurring hotspots.24

6.4.3 Effective Communication of Standards and Processes

Effective communication is fundamental to ensuring quality outcomes—it is essential for all to 

know what the expectations of quality are and how to implement the processes in place for 

quality assurance. In the shift to HPH, in which the house works as a system, the work of one 

trade contractor tends to be intertwined with, and have substantive impacts on, that of another. 

As a company moves to high performance construction, effective communication is paramount. 

Effective communication can take the form of weekly meetings, on-site training sessions, 

detailed and well-documented specifications in a scope of work, job ready checklists, and other 

methods. High performance scopes of work can offer an effective means of communicating 

expectations for installation procedures, specifications, and tolerances for builders and 

remodelers (see footnote 19). These documents can affect employees in the field and in the 

office; it is critical to elucidate all new processes, procedures, and specifications for all company 

operations to the appropriate staff and trade partners. 

6.4.4 Achieve Outstanding Results Using Quality Performance Metrics

Quality performance metrics—such as defect rate, cycle time, revenue, and customer 

satisfaction—allow builders, remodelers, and contractors to track a quality program’s success. 

Yet, many builders and remodelers do not track metrics, do not define which metrics indicate 

high performance, or do not monitor metrics to guide quality improvement strategies. When 

implementing quality programs, it is essential to track metrics in order to analyze performance 

and define areas needing improvement. Performance metrics can be measured against predefined 

goals or against past performance. 

Common performance metrics for HPH include: 

• Short-term metrics 

• Home Energy Rating System (HERS) Index25

 23 These high performance scopes of work inspection checklists for different construction activities, though designed 

for new home construction, provide a good basis for what to include in an effective inspection checklist for builders 

or remodelers. See www.toolbase.org/ToolbaseResources/level3.aspx?BucketID=5&CategoryID=62 for more 

information.

24 See www.toolbase.org/ToolbaseResources/level4BP.aspx?ContentDetailID=4171&BucketID=5&CategoryID=25

for more information.

25 See http://www.resnet.us/hers-index for a complete explanation of the RESNET HERS Index
22

• Air infiltration results 

• Duct leakage results

• Pressure differentials across doorways

• Room-by-room airflow rates (relative to design)

• Affordability 

• Long-term metrics

• Whole-house energy use

• End-use energy use 

• Energy production 

• Moisture performance

• Durability

• Affordability

• Quality metrics

• Customer satisfaction ratings

• Profitability

• Number of days to complete a job (cycle time) 

• Number of punch items at final inspection

• Number of production callbacks per job

• Number of warranty callbacks per job

• Service call or warranty rate

• No fault service call rate

• First time quality rate

• Scrap (pounds).

Beyond the common performance metrics, it is also helpful to track the cost of each element of 

quality—prevention, appraisal, and internal and external failures. Ideally, performance metrics 

should be tracked, tabulated, and reviewed on a monthly or quarterly basis to reveal areas of 

success and areas needing improvement. 

6.4.5 Effective Continuous Improvement Process

Quality oriented companies are never satisfied with current performance and are always seeking 

to improve. Although many companies may want to improve, quality-oriented companies 

distinguish themselves by applying a strict process approach to continuous improvement that 

follows the general principles of plan, do, check, and act or define, measure, analyze, improve,

and control. The feedback loops inherent in the continuous improvement process result in the 

constant monitoring, measurement, and tabulation of company performance to understand what 

is not effective and to develop new implementation strategies. 

6.5 Step 5: Expand to Comprehensive Quality Management System

A truly high performing home cannot be built by the piecemeal upgrade of a few elements such 

as ENERGY STAR appliances or windows—instead, it requires a whole-house approach to 
23

design and construction. Likewise, the successful implementation of a QMS requires a 

comprehensive approach to quality that impacts the entire corporation. 

Although it is acceptable to start by introducing a few quality management tools and techniques, 

the most successful companies are those that realize the need for and implement a 

comprehensive QMS. Quality management activities, just like the various elements of an HPH, 

function best when designed and implemented together as a system. 

For a residential construction company looking to expand quality activities into a comprehensive 

QMS, there are a few essential resources. Companies can use any of a number of comprehensive 

QMS available, including ISO 9001 (a generic system for any type of business), and the NHQ 

Builder and NHQ Trade Contractor certification programs.26 These programs provide support 

and guidance for developing a comprehensive QMS. 

6.6 Step 6: Become Third-Party Certified

Many companies that seriously embrace formal QMS recognize the importance of becoming 

third-party certified through the NHQ certification programs or through ISO 9001. Although 

companies often emphasize third-party recognition for the credibility it lends in the eyes of the 

customer, it also provides tremendous value beyond marketing. Third-party quality certification 

can increase accountability, pride, and unity as well as knowledge and understanding of quality 

management principles. 

6.7 Step 7: Apply for Quality Awards

Applying for a quality award is not necessary; however, many builders, remodelers, and 

contractors have found this a structured way to begin working toward a formal QMS. Applicants 

can apply to a few different quality award programs, including the NHQA and Malcolm Baldrige 

National Quality Award, to evaluate how their business measures up to high quality standards. 

As with quality certification, applying for and winning quality awards can bring much more to a 

company than simply a marketing edge. Simply going through the application process enables a 

company to analyze its quality performance according to a strict rating system. 

Each NHQA applicant is given written feedback from expert judges, including representatives of 

past NHQA-winning companies. Further, award finalists receive site visits from a team of 

judges. Both the feedback reports and the site visits are invaluable learning opportunities from 

quality experts within the residential construction industry. 

7 Conclusion

This report primarily describes quality processes in new home construction, and the goal is to 

enhance quality in existing homes using these same techniques to increase - post construction

quality, reduce warranty, and increase customer satisfaction.

27 Effective quality management is 

challenging for any company to implement, and is particularly challenging given the unique 

conditions in which site-built homes are constructed. As builders, remodelers, and trade 

contractors shift operations from conventional to HPH construction, having an effective QMS is 

 26 See http://toolbase.org/ToolbaseResources/level3.aspx?BucketID=5&CategoryID=25 27 The first step of this work included developing a draft existing home scope of work from a new home statement 

for crawlspaces (NAHB Research Center, 2012). 
24

essential for a smooth transition. A QMS is the framework for the proper implementation of the 

strict tolerances and stringent specifications inherent in an HPH. 

Not only can a QMS help to get the job done right, but also it has been repeatedly demonstrated 

to improve a company’s success—as measured by profitability, customer satisfaction, or other 

key indicators. Moreover, a QMS actually reduces the total cost of quality, when factoring the 

increased cost of prevention and defects with the decreased cost of correcting defects. 

Starting the QMS process begins with the intentional creation of a corporate culture of quality. 

Effective quality management is a continuous process in which a company constantly monitors 

its performance and its business environment with the goal of continuous improvement. Within 

the QMS, a company is always seeking ways to achieve higher efficiency and effectiveness in 

delivering the service and finished product. A quality-oriented company, no matter how 

successful, is never satisfied with the status quo. QMS is vital as the industry shifts from building 

conventional to high performing homes and ultimately state-of-the-art homes.
25

References

American Society for Quality (ASQ), The History of Quality Overview, http://asq.org/learnabout-quality/history-of-quality/overview/overview.html. 

American Construction Insurance Group. (2009). Quality News Network newsletter. October. 

www.acig.com/services/quality/2009-10.pdf. 

Cokins, G. (2006). “Measuring the Cost of Quality for Management.” Quality Progress

September, 2006, pp. 45-51. http://www.platinumregistration.com/kbfiles/qp0906cokins.pdf

Josephson, P.E.; Hammarlund, Y. (1999). “The Causes and Costs of Defects in Construction. A 

Study of Seven Building Projects.” Automated . Construction (8:6); pp. 681–642.

Lukachko, A.; Gates, C.; Straube J. (2011). Strategy Guideline: Advanced Construction 

Documentation Recommendations for High Performance Homes. Building Science Corporation. 

December 2011.

Mills, A.; Love, P.E.D.; Williams, P. (2009). “Defect Costs in Residential Construction.”

Journal of Construction Engineering and Management (Volume 189:1); January 2009. pp. 12-

16.

NAHB Research Center. (2012). NAHBRC-IP Building America Deliverable Number 11.4.2.1.

Quality Assurance Strategy for Existing Homes, Draft Energy Efficiency Crawlspace Foundation 

Retrofit—Mixed Humid Climate. Subcontract Number: AXL-9-99208-02.

NAHB Research Center. (2010). NAHBRC-IP Building America Deliverable Number 4.5.2.

Final Report of Quality Assurance Activities for New Homes (Interim Project Report), 

Economics of Quality: The Implementation & Economic Impact of Quality Management in the 

Homebuilding Industry. Subcontract Number: AXL-9-99208-01.

http://toolbase.org/PDF/BestPractices/AppendixAEconomicsofQuality.pdf

McIntyre, C. and Kirschenman, M (2000). “Survey of TQM in Construction Industry in Upper 

Midwest.” Journal of Management in Engineering (Volume16:5); September/October, 2000, pp. 

67-70.

Rosenfeld, Y. (2009). “Cost of Quality versus Cost of Non-Quality in Construction.”

Construction Management and Economics (27); pp. 107–117.

Quality Built. (2006). “Nation’s Leading Risk Management Company Releases Top Builder 

Defect Data for Construction Industry: Quality Built Data Shows Builder Top Risk Issues Are 

Preventable.” Media Kit, International Builders’ Show, Orlando, FL, January 11, 2006.

Rodchua, S. (2009). “Comparative Analysis of Quality Costs and Organization Size in the 

Manufacturing Environment.” Quality Management Journal (16:2); pp. 34–43.
26

Appendix A: Predesign Assessment

Table 3 lists the key quality management tools and resources that have been developed as part of 

the Building America program and provides of brief description of each resource. These tools are 

available on www.ToolBase.org.

28

Table 3. Key Quality Management Tools

BA Quality Management 

Tool/Resource Description

High Performance Scopes of Work

Framing

HVAC

Excavation, Backfill, Grading

Vinyl Siding

Rigid Insulating Sheathing

Weather Resistant Barrier

Vented/Unvented Crawlspace

HPH Scopes of Work provide design and installation 

specifications and tolerances, as well as QA tools and 

techniques to facilitate the successful design and 

construction to meet those specifications.

Draft HPH Quality Management 

Requirements and NHQ Requirements

Provide industry leaders a framework around which to 

design a HPH quality management system.

Hotspot Implementation Guide and 

Tools

Provide a training approach and tool for effective targeted 

training.

Economics of Quality Research Paper Provides the research-based justification to demonstrate the 

economic benefits of quality management on the bottom line.

Veridian Homes HPH Quality 

Management Case Study

Provides a real example of a HPH builder with a fullydeveloped quality management system with excellent results 

and explanations of many quality management approaches 

that this company is implementing.

Guidelines on Quality Management 

and HPH Remodels

Provides remodelers guidance for integrating quality into 

their business operations. 

NHQ Award for Remodelers, Builders 

and Trade Contractors

Provides contractors a process to evaluate their company 

practices against a rating system in eight key quality 

categories. Each award applicant receives a valuable 

feedback report, and finalists get a site visit by judges

Remodeler, builder and trade 

contractor certifications ISO, NHQ etc.

Provide contractors with a third-party auditor visit their offices 

and jobsites to evaluate their QMS manual and implementation.

Primer Orientation to learn about quality management to design and 

construct existing and new homes.

Prioritized Gap Analysis

(currently under development)

Tool for contractors to assess current quality practices and 

identify practices they should add to their quality 

management activities 

Scopes of Work for Existing Homes 

(currently under development)

Defines elements in a Scope of Work for existing homes and 

the process to develop the scope.

 28 See www.toolbase.org/ToolbaseResources/level3.aspx?BucketID=5&CategoryID=25 for more information. 
27

Appendix B: Definitions of Common Quality Terms

A major challenge to bringing quality management systems to the residential construction 

industry is confusion over the often similar sounding terms used to discuss quality. To address 

this, common words and phrases related to quality are defined here in simple language rather 

than the formal, technical verbiage often used by quality management experts. 

Appraisal Cost: Costs of measuring, evaluating, or auditing products and services to ensure 

conformance to standards of quality.

Continuous Improvement: The ongoing and structured efforts to evaluate and improve business 

operations’ efficiency and to improve the quality of the finished product or service.

Culture of Quality (Quality Culture): Collective mindset of all employees emphasizing and 

valuing high caliber performance, products, and continual improvement including internal 

operations and worker satisfaction.

Economics of Quality: The total cost of quality, which is the cost of conformance (meeting 

quality standards) minus the cost of nonconformance (producing a poor quality product), as 

described by the following equations: 

Economics of Quality (total cost) = Cost of Conformance—Cost of Nonconformance 

Cost of Conformance (good quality) = Prevention Costs + Appraisal Costs 

Cost of Nonconformance (poor quality) = Internal Failure Costs + External Failure Costs

External Failure Costs: Costs incurred as a result of delivering a defective product or service to 

the customer.

High Performance Home Quality Management System: A method for managing the process 

of building homes according to high performance specifications.

Internal Failure Costs: Costs incurred as a result of correcting defects during the production 

process.

Plan, Do, Check, and Act: Four steps in a continuous improvement process: develop a plan, 

implement the plan, check for desired results, and act to correct and improve the plan.

Prevention Cost: Cost of all activities designed to prevent poor quality in products and services. 

Quality Assurance (QA): A systematic process to improve both the finished quality of products 

and services and the efficiency (costs) required to produce them. QA addresses overall 

improvement of business operations to prevent defects from occurring in the first place. 

Examples of QA include developing detailed scopes of work with input from all relevant parties 

and training workers on proper installation (prevention). 

Quality Control (QC): A subset of QA, QC focuses on detecting and correcting errors and 

defects. Steps taken to ensure that products and services adhere to specifications and are free from 

defects; QC most often takes the form of some kind of assessment or inspection process used to 

detect and correct errors. An example of QC is the final inspection of a product installation.

Quality Management System (QMS): A formalized system that documents the structure, 

responsibilities, and procedures required to achieve effective quality management.29

 29 Definition from the American Society for Quality, www.asq.org
DOE/GO-102012-3591 ▪December 2012

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