Poor Quality Costs in the Swedish Central Government Budget: the Influence on Costs For Construction Projects

The poor-quality costs in construction projects are traditionally estimated to 1-10% of the total project cost. These estimations normally include the projects’ own processes. However, in Sweden more than 50% of the costs for producing buildings are taxes. To better understand the total poor-quality costs there should also be an analysis of the processes financed by the taxes. This paper aims to map and quantify poor-quality costs hidden in the taxes, here limited to an analysis of the Swedish central government budget. All the expenditures of the budget proposal for 2005 have been classified according to their proportion of poor-quality costs. The preliminary analysis indicates that as much as 28.9% of the expenditures in the public sector are poor-quality costs. This implies that more than 15% of the production costs of an average construction project are poor-quality costs that are hidden in the taxes. A reduction of these costs would enable a tax reduction or an increase of activities to other more essential expenditures in the public sector. Consequently, it will give the customers more value for their invested money.