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TOPIC: How is a warranty that extends beyond the end of a project accounted for?

How is a warranty that extends beyond the end of a project accounted for? 3 weeks 6 days ago #22164

  • Ryan Klopp
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I'm confused as to if a project can end when there is an outstanding warranty on a deliverable, and if the project can end when there is an outstanding warranty then how are the costs associated with correcting the defect accounted for and recorded in the project budget ?

How is a warranty that extends beyond the end of a project accounted for? 3 weeks 2 days ago #22220

  • Kyle Kilbride, PMP
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In my experience if a product is produced by a supplier the warranty costs would be borne by the supplier itself (the business), not the individual project (depending on the specific contract). Warranty is considered a cost of nonconformance, but depending on the warranty period these issues could be found long after the project is closed. Therefore, it is necessary for the business (of the supplier) to be prepared to support these claims as they arise. The supplier should build this cost (or a factor of it) into their price.
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Kyle Kilbride, P.Eng, PMP
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The following user(s) said Thank You: Ryan Klopp

How is a warranty that extends beyond the end of a project accounted for? 2 weeks 2 days ago #22366

  • Harry Elston
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Ryan,

I'm a little late to this discussion. Kyle is correct. Warranty work that extends to the life of the project is accounted for under "operations" as opposed to "project." In a real setting, a business making a widget will perform testing on the widget to fine the mean time between failures, and then make a decision based on that information to determine if they need an insurance policy or just absorb the cost of replacing or repairing the widget. That is built into the price of the widget.

Harry
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Harry J. Elston, Ph.D., CIH, PMP
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