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A methodology was developed to measure cost of quality failures in two major road projects based, largely, upon a work-shadowing method. The paper shows how the initial data was collected and categorised into definable groups and how the costs were estimated for each of these categories. The findings suggests that, if the projects examined are typical, the cost of failures may be a significant percentage of total costs and that conventional means of identifying them may not be reliable. Moreover, the costs will not be easy to eradicate without widespread changes in attitudes and norms of behaviour within the industry and improved managerial coordination of activities throughout the supply chain.

Building on the results of a far-reaching action research project we discuss an attempt to introduce target costing in the UK construction industry. After examining some of the issues facing the UK construction industry, we examine the case for using target costing as a way of supporting supply-chain integration in view of an improvement of the level of profitability and quality of the industry. After presenting evidence from two pilot projects we propose some considerations on target costing and its applicability to the UK construction sector and derive directions for future research.

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