The VENDOR must measure the quality of the product being developed in term of defect density (defects produced/size of the software (in terms of Function Points).
The VENDOR must set an acceptable level of quality delivered as per CLIENT definition.
Below that acceptable level, the software product must be treated below quality.
For example: If the CLIENT defines the acceptable level as : less than 2 defects with a severity value of 1, during a warranty period of 100 days, after production, per 150 Function Points. Below that limit the product will be treated as below quality and the VENDOR should be ready for a rework to improve quality without any additional charges.
The VENDOR must use the defect density to develop trend analysis and measure improvements signaling an increase in overall quality of software/quality of build activities.
As a best practice, the VENDOR must use the quality report as a historical indicator and use it in future while estimating projects of similar size/complexity level.