What Are Tolerances in PRINCE2®?
PRINCE2 tolerances define how much a project can deviate from an agreed target before the situation needs to be escalated to a higher management level.
They establish the limits of delegated authority, allowing Project Managers and delivery teams to make decisions without seeking approval for every minor variation. If a forecast indicates that an agreed tolerance will be exceeded, the situation must be escalated through the appropriate management level.
Put simply, tolerances answer an important question: how far can I deviate from the plan before I need to ask someone else to decide?
For example, a Project Manager might be authorised to manage a stage with a target duration of ten weeks and a time tolerance of one additional week.
If the stage is forecast to take ten and a half weeks, the Project Manager can manage the variation within their agreed authority.
However, if the forecast increases to twelve weeks, the agreed time tolerance would be exceeded, requiring escalation.
This is how PRINCE2 balances management control with flexibility.
What Are PRINCE2 Tolerances?
A tolerance in PRINCE2 is the permitted variation from a plan’s agreed performance target that can be managed without escalating the deviation to the next management level.
Tolerances are central to the Manage by Exception principle, which defines how authority is delegated between different levels of project management.
Rather than requiring senior management to approve every adjustment, PRINCE2 establishes boundaries within which people can make their own decisions.
Tolerances can be applied to seven aspects of project performance: benefits, cost, time, quality, scope, sustainability, and risk.
The amount of permitted variation depends on the project and the decisions made by the appropriate management level. PRINCE2 does not prescribe a universal percentage or amount that every project must use.
Why Does PRINCE2 Use Tolerances?
PRINCE2 uses tolerances to establish clear decision-making authority while maintaining control over project performance.
Projects rarely progress exactly as originally planned. Activities may take longer than expected, costs may change, risks may develop, or requirements may need clarification.
Without agreed boundaries, Project Managers could find themselves seeking approval for every adjustment, even when a small deviation has no significant effect on the project.
Tolerances help avoid this by:
- Allowing decisions to be made at the appropriate management level.
- Establishing clear accountability.
- Reducing unnecessary escalation.
- Encouraging forward-looking progress monitoring.
- Giving senior management visibility of significant deviations.
- Supporting timely decisions when a plan can no longer be delivered within its agreed limits.
Importantly, a tolerance is not permission to ignore poor performance. The person managing within tolerance remains responsible for monitoring progress and taking appropriate action.
How Do Tolerances Support Management by Exception?
Management by Exception means delegating authority within agreed tolerances and escalating decisions when those limits are forecast to be exceeded.
This is one of the seven PRINCE2 principles.
Instead of continuously supervising every activity, higher management establishes the targets and tolerances that define what the next management level can decide.
The people receiving that authority manage their work within those limits and provide agreed progress information.
Escalation becomes necessary when a forecast indicates that the relevant tolerance cannot be maintained.
For example, a Project Board may authorise a Project Manager to manage a stage within agreed time, cost, and other performance limits.
The Project Manager can then make adjustments to the work, provided those adjustments remain within their delegated authority.
If the stage is forecast to exceed its tolerance, the Project Manager must refer the situation to the Project Board for a decision.
The aim is not to remove senior management from the project. It is to ensure senior management becomes involved when its authority and judgement are needed.
For a more detailed explanation, read our guide to Management by Exception in PRINCE2.
What Is the Difference Between a Target and a Tolerance?
A target describes the planned result. A tolerance defines the permitted amount of variation from that target before escalation is necessary.
For example, imagine a project stage has the following agreed conditions:
| Element | Illustrative value |
|---|---|
| Target completion date | 30 September |
| Permitted delay | 5 working days |
| Forecast completion | 3 working days late |
| Position | Within time tolerance |
The target remains the 30th of September. The tolerance does not create a new target or make late delivery desirable.
It just allows the Project Manager to manage the forecast variation without automatically requesting a decision from the Project Board.
If the forecast later increases to seven working days beyond the target, the Project Manager is no longer forecast to remain within the authorised time tolerance.
Tolerance is therefore a control boundary, not a revised objective.
Tolerances can permit variation above and below a target, although the agreed limits do not necessarily have to be equal in both directions.
What Can Tolerances Be Set Against in PRINCE2?
PRINCE2 uses seven performance targets to plan, monitor, and control projects.
These are benefits, cost, time, quality, scope, sustainability, and risk.
Each target addresses a different aspect of project performance, and tolerances establish the agreed limits for managing variation.
| Performance target | What the tolerance controls | Illustrative example |
|---|---|---|
| Benefits | Variation in expected benefits | Forecast improvement must remain above an agreed minimum |
| Cost | Permitted variation in expenditure | Stage spending may exceed the target by no more than £5,000 |
| Time | Permitted variation in completion timing | Completion may be delayed by up to five working days |
| Quality | Variation from agreed product quality criteria | A measured response time must remain within an agreed range |
| Scope | Permitted variation in the products delivered | Certain optional requirements may be excluded under agreed conditions |
| Sustainability | Variation from agreed sustainability measures | Forecast emissions must remain below an agreed limit |
| Risk | Limits on the plan’s aggregated risk exposure | Combined exposure from identified threats must remain within an agreed threshold |
Time Tolerance
Time tolerance defines how much earlier or later work may be completed compared with an agreed target date.
For example, a project stage expected to finish in eight weeks might be authorised to finish up to three working days later.
If the forecast remains within that permitted variation, the Project Manager can continue managing the stage.
If the forecast exceeds the agreed limit, escalation is required.
Cost Tolerance
Cost tolerance defines the permitted variation from an agreed financial or resource budget.
For example, a stage with a budget of £80,000 might have an authorised upper limit of £85,000.
The Project Manager could make decisions within that agreed cost tolerance, subject to other relevant constraints and authority.
However, cost tolerance should not be confused with spare money or an automatic contingency fund.
It defines the boundary of delegated authority. It does not automatically establish an additional pool of money that can be spent without considering the approved plan and other project controls.
Scope Tolerance
Scope tolerance defines the permitted variation in the products that a plan is expected to deliver.
For example, a software implementation project might distinguish between mandatory requirements and lower-priority enhancements.
The approved scope tolerance could permit certain optional enhancements to be deferred while requiring all mandatory capabilities to be delivered.
However, this flexibility must be established in advance.
Scope tolerance does not mean that a Project Manager can independently remove any feature or requirement they consider inconvenient.
The Project Manager must remain within the agreed scope boundaries and delegated authority.
Scope tolerance can be particularly useful where products are delivered iteratively and requirements have different priorities.
Quality Tolerance
Quality tolerance describes the acceptable variation in specified quality characteristics.
For example, a customer-service platform might have an agreed response-time target and an acceptable performance range.
A result that falls within that agreed range may satisfy the relevant quality requirement.
In PRINCE2, quality tolerances are established in product descriptions through the quality specifications and acceptance criteria. They are not simply treated as a general allowance to deliver lower-quality work.
If a product fails a mandatory acceptance requirement, it cannot automatically be considered acceptable merely because another performance target is within tolerance.
Unlike time and cost tolerances, quality tolerances are defined at product level through product descriptions, rather than being summarised as a single tolerance for an entire stage or Work Package.
Risk Tolerance
Risk tolerance establishes limits on the aggregated risks associated with a plan.
For example, an organisation might set a limit on the combined financial exposure from identified threats.
If the project’s forecast risk exposure moves beyond that agreed limit, the situation may require escalation even if the anticipated threats have not yet occurred.
It is important to distinguish this from risk appetite, which concerns the amount and type of risk the business is willing to accept in pursuit of its objectives.
Risk tolerance provides a specific control boundary for the project or plan, informed by the relevant risk management arrangements.
To explore how uncertainty is assessed and controlled, read our PRINCE2 Risk Management guide.
Benefits Tolerance
Benefits tolerance defines the permitted variation in the benefits expected from the project.
For example, a customer-service improvement project might aim to reduce the average time required to resolve enquiries.
If the forecast improvement falls below an agreed acceptable level, the project may be approaching or exceeding its benefits tolerance.
Benefits do not always have to be financial. They may also relate to operational improvements, service quality, user outcomes, or other measurable business objectives.
Sustainability Tolerance
Sustainability tolerance defines acceptable variation from the sustainability targets established for the project.
This is an important aspect of PRINCE2 Version 7, which explicitly includes sustainability among its seven performance targets.
Depending on the project, sustainability measures might relate to environmental impacts, resource use, or other agreed sustainability commitments.
For example, a project could establish a maximum level of emissions associated with delivering a new system.
The relevant tolerance would establish the limit beyond which the forecast performance needs to be escalated.
As with every other tolerance, the measure must be appropriate to the project and agreed by the relevant management level.
At What Levels Are PRINCE2 Tolerances Set?
PRINCE2 applies tolerances at project, stage, and team levels, creating a structured approach to delegated authority.
The overall control structure involves four management layers: the business layer, directing, managing, and delivering.
The business layer establishes project-level authority. The Project Board directs the project within that authority, the Project Manager manages authorised stages, and Team Managers or delivery teams manage their allocated work within agreed limits.
What Is Project Tolerance?
Project tolerance defines the overall limits within which the Project Board has authority to direct the project.
These limits are established by the business layer.
For example, the business might authorise a project with an agreed budget and permitted cost variation.
As long as the overall project forecast remains within the authorised project tolerances, the Project Board can direct the project within its delegated authority.
If the project is forecast to exceed those limits, the Project Board must refer the matter to the business layer for a decision.
What Is Stage Tolerance?
Stage tolerance defines the permitted deviation from the targets for a particular management stage.
The Project Board establishes the stage tolerances when authorising the stage, and the Project Manager is responsible for managing within them.
This allows the Project Manager to make day-to-day decisions without asking the Project Board to approve every adjustment.
If the stage is forecast to exceed an agreed tolerance, the Project Manager must escalate the situation to the Project Board.
Stage tolerances are particularly important because PRINCE2 manages projects in stages, with review and decision points throughout the project lifecycle.
Read more about PRINCE2 project stages and the project lifecycle.
What Is Work Package Tolerance?
Work Package tolerance establishes the limits within which a Team Manager or delivery team can carry out authorised work.
The Project Manager agrees the Work Package tolerances with the Team Manager.
For example, a Work Package might have an agreed completion date, cost limit, scope, and relevant sustainability or risk constraints.
The Team Manager manages the work within those boundaries.
If the Work Package is forecast to exceed its tolerance, the Team Manager raises an issue with the Project Manager.
This does not automatically require an Exception Report to the Project Board.
The Project Manager may be able to resolve the issue while keeping the overall stage within its agreed tolerances.
This distinction is important for understanding how PRINCE2 avoids unnecessary escalation.
Who Sets Tolerances and Who Can Make Decisions?
The authority to set and manage tolerances flows through the PRINCE2 management structure.
| Management level | Sets or agrees | Who manages within it | Escalation |
|---|---|---|---|
| Business layer | Project tolerances | Project Board | Business layer decides on project-level exception |
| Project Board | Stage tolerances | Project Manager | Project Board receives stage-level exception |
| Project Manager | Work Package tolerances | Team Manager or delivery team | Project Manager receives Work Package issue |
The business layer sits above the project management team and provides the overall governance boundaries.
Within the project, the Project Board, Project Manager, and Team Manager have different responsibilities and decision-making authority.
The exact organisational arrangements can be tailored, but the central principle remains: people must understand what they are authorised to decide and when they need to escalate.
For more detail, explore our PRINCE2 Roles and Responsibilities guide.
What Is an Exception in PRINCE2?
An exception is a situation in which a forecast indicates that an agreed tolerance will be exceeded.
It is not simply another word for a problem, delay, risk, or issue.
For example, a stage might experience an unexpected two-day delay. If this remains within the approved time tolerance, it does not automatically create a stage-level exception.
However, if the stage is now forecast to finish beyond its authorised time tolerance, the situation requires escalation.
This is an important distinction because PRINCE2 uses exceptions to identify situations requiring a decision from a higher management level.
Do You Escalate Before Tolerance Is Exceeded?
Yes. PRINCE2 requires escalation when the forecast indicates that the relevant tolerance will be exceeded, rather than waiting until the limit has already been breached.
For example, imagine a stage is authorised to finish no more than five working days late.
Two weeks before the planned completion date, the Project Manager identifies that the work is likely to finish eight working days late.
Even though the original completion date has not yet arrived, the forecast exceeds the agreed tolerance.
The Project Manager must therefore escalate the situation rather than waiting for the delay to occur.
This forward-looking approach allows higher management to make decisions while there may still be opportunities to respond.
What Happens When a Tolerance Is Forecast to Be Exceeded?
The action depends on which management level’s tolerance is forecast to be exceeded.
If a Work Package is forecast to exceed its tolerance, the Team Manager raises an issue with the Project Manager. The Project Manager then determines whether the issue can be resolved within the authorised stage tolerances.
If the stage is forecast to exceed its tolerances, the Project Manager produces an Issue Report to analyse the deviation, followed by an Exception Report for the Project Board. The Exception Report provides the information, options, and recommendations needed for the Project Board to decide how to proceed.
If the overall project is forecast to exceed project-level tolerances, the Project Board must refer the matter to the business layer for a decision.
What Is an Exception Report?
An Exception Report informs the Project Board when a Stage Plan or Project Plan is forecast to exceed its agreed tolerances.
It explains the situation and provides options and recommendations to support a decision about how to proceed.
The Project Manager prepares the report.
The Project Board then considers the available options and determines the appropriate action within its authority.
Depending on the circumstances, this could include directing corrective action, adjusting relevant tolerances where authorised, seeking further information, or requesting an Exception Plan.
If the overall project tolerance is forecast to be exceeded, the matter must be referred to the business layer.
An Exception Report is therefore a decision-support product, not simply a record that something has gone wrong.
What Is an Exception Plan?
An Exception Plan explains how the project will respond to an exception, following an Exception Report and the relevant management decision.
It may be requested when the Project Board decides that a revised approach is necessary.
For example, an Exception Plan might describe the work needed to recover a stage following a significant forecast delay.
Where approved as the replacement for the current Stage Plan, it becomes the new basis for managing the stage.
However, an Exception Plan is not automatically required whenever an exception occurs.
The Project Board may choose other responses, and Work Package-level issues do not require separate Exception Plans for Team Plans.
Where recovery actions extend beyond the scope of the current stage, the Project Plan may also need to be changed.
To understand how these products fit into PRINCE2 documentation, read our PRINCE2 Management Products guide.
How Do Risks and Issues Affect Tolerances?
Risks and issues can affect whether a project, stage, or Work Package is forecast to remain within its agreed tolerances.
The important distinction is that a risk concerns uncertainty, whereas an issue is something that requires management attention because it has happened, been identified, or has been proposed.
For example, a supplier may warn that a critical component could arrive late. This creates a threat to the schedule.
The Project Manager should consider how that threat could affect the forecast completion date.
If the risk exposure itself exceeds an agreed risk tolerance, or the forecast impact means the stage will exceed another tolerance, escalation may be necessary.
An issue can have a similar effect.
Suppose a customer requests an additional feature that would add significant time and cost to an approved stage.
The Project Manager must assess the impact against the relevant targets and tolerances.
If the change can be handled within delegated authority, it may be managed without a stage-level exception.
If it would cause a forecast breach of stage tolerance, the matter must be escalated.
For further reading, explore Risk vs Issue in PRINCE2.
Where Are Tolerances Defined and Monitored?
Tolerances are established through the relevant PRINCE2 planning and management information.
Their location depends on the performance target and management level.
For example:
- Project Plan: overall project time, cost, and scope tolerances.
- Business Case: project-level benefits, sustainability, and risk tolerances.
- Stage Plan: relevant stage-level performance tolerances.
- Work Package description: the agreed tolerances for delivery work.
- Product descriptions: relevant product quality criteria and tolerances.
Progress is then monitored against the agreed targets, actual performance, and forecasts.
The PRINCE2 Progress practice includes mechanisms for monitoring achievements, forecasting outcomes, reporting progress, and escalating deviations.
Checkpoint Reports can provide information on Work Package progress, while Highlight Reports help the Project Board understand progress at stage level.
Exception Reports are used where the appropriate tolerance boundary is forecast to be exceeded.
For more on establishing project plans, see our guide to creating a project plan using PRINCE2.
PRINCE2 Tolerance Example
Consider a fictional project to implement a new customer-service platform.
The project has several management stages, including a stage for configuring, integrating, and testing the system.
The Project Board has authorised the current stage with the following targets and tolerances.
| Performance area | Target | Authorised tolerance |
|---|---|---|
| Time | Complete by 30 June | Up to 5 working days late |
| Cost | £70,000 | Up to £8,000 over budget |
| Scope | Agreed platform capabilities | Specified optional features may be deferred |
| Risk | Agreed stage risk exposure | Must remain within the authorised risk limit |
Scenario 1: Within Tolerance
During testing, the Project Manager identifies that the stage will probably finish two working days later than planned.
The forecast remains within the authorised five-working-day delay.
Provided that the proposed response remains within the Project Manager’s overall delegated authority, the Project Manager can adjust the remaining work without seeking an exception decision from the Project Board.
The delay should still be monitored and reflected in appropriate progress reporting.
The target has been missed in the forecast, but the tolerance has not been exceeded.
Scenario 2: Forecast to Exceed Tolerance
A further testing problem is identified.
The new forecast shows that the stage will finish eight working days later than planned.
This exceeds the authorised time tolerance of five working days.
The Project Manager must escalate the forecast exception to the Project Board.
The Project Manager prepares the relevant issue information and an Exception Report, outlining the expected impact and possible responses.
The Project Board then decides how the project should proceed.
It might authorise an appropriate response within its remaining authority, consider changes to the stage, or request an Exception Plan.
The distinction is not whether the project has encountered a problem. It is whether the forecast remains within the limits of delegated authority.
What If One Target Is Within Tolerance but Another Is Not?
A project can be within tolerance for one performance target and outside tolerance for another.
For example, the customer-service platform may be forecast to finish on time but exceed its authorised stage budget.
Being within the time tolerance does not cancel out the cost exception.
The Project Manager must consider all relevant performance targets rather than treating them as one combined allowance.
Can You Trade One Tolerance Against Another?
A Project Manager should not assume that unused tolerance in one area automatically authorises a breach in another.
For example, a stage that is forecast to finish earlier than planned does not automatically gain permission to exceed its cost tolerance.
The relevant limits of delegated authority still apply.
Trade-offs may be considered by the appropriate decision-maker, and the Project Board may have options to reallocate tolerances within its project-level authority.
The Project Board may consider reallocating available project tolerances to resolve a stage-level exception, provided the resulting position remains within the overall project tolerances authorised by the business layer.
For example, the Project Board might approve an adjustment to a stage’s cost tolerance if sufficient authority remains at project level. However, the Project Manager cannot independently exceed an agreed stage cost tolerance simply because the stage is ahead of schedule.
Any adjustment must be authorised at the appropriate management level. If the overall project tolerances are forecast to be exceeded, the Project Board must refer the matter to the business layer.
How Do Tolerances Support the Business Case?
Tolerances help project management identify when significant deviations may affect the project’s continued business justification.
For example, a project may have been approved because its expected benefits justify the estimated investment.
If costs rise substantially or forecast benefits fall below agreed limits, the assumptions supporting the Business Case may need reassessment.
This does not mean every tolerance exception automatically makes a project unjustifiable.
Rather, significant deviations can trigger decisions about whether the proposed investment remains worthwhile and how the project should proceed.
Read our PRINCE2 Business Case guide for more detail.
Can PRINCE2 Tolerances Be Tailored?
Yes. PRINCE2 tolerances should be established to suit the specific project and its context.
The appropriate limits will depend on factors such as:
- The project’s importance and complexity.
- The level of risk.
- Organisational policies and governance arrangements.
- The experience and capabilities of the people involved.
- Commercial relationships and contractual requirements.
- The chosen delivery approach.
- The consequences of exceeding particular performance targets.
For example, a project working towards a legally mandated implementation date may require a particularly tight time tolerance.
Another project might allow greater flexibility in its delivery date but have strict quality or sustainability requirements.
There is no universal rule that smaller projects should always have wider tolerances or more complex projects should always have narrower tolerances.
The appropriate balance depends on the decisions and constraints that matter to that project.
Do Tolerances Work in Agile or Hybrid Projects?
Yes. PRINCE2 tolerances can be used in projects employing iterative-incremental, linear-sequential, or hybrid delivery methods.
PRINCE2 establishes how the project is directed and managed, without prescribing every specialist delivery technique.
For example, a software delivery team might work in short iterations with fixed time and cost limits while allowing an agreed amount of flexibility in scope.
The Project Manager still needs to ensure that the work remains within the relevant delegated authority.
In this way, PRINCE2 tolerances can support flexibility in delivery while preserving clear management control.
For more context, read Is PRINCE2 Waterfall?.
Common PRINCE2 Tolerance Mistakes
Understanding tolerances becomes easier when you recognise several common misunderstandings.
- Treating tolerance as a target: The goal remains the agreed target, not the outer limit of permitted variation.
- Confusing tolerance with contingency: Delegated authority is not automatically an additional budget or resource reserve.
- Escalating every minor deviation: Not every variation requires a decision from the next management level.
- Waiting for an actual breach: A forecast that tolerance will be exceeded is sufficient to trigger escalation.
- Ignoring differences between management levels: A Work Package issue does not automatically create a stage-level exception.
- Assuming only time and cost matter: PRINCE2 includes seven performance targets.
- Using flexibility in one target to justify exceeding another: Different tolerances remain subject to their own authorised limits.
- Treating quality tolerance as permission to ignore requirements: Products must still meet their agreed acceptance and quality criteria.
- Applying identical tolerances to every project: Tolerances should reflect the project’s particular circumstances.
The central lesson is that tolerances are not simply numbers to monitor. They define when a decision can be made locally and when it belongs to a higher authority.
PRINCE2 Tolerance Checklist
Before deciding how to respond to a forecast deviation, ask:
- What is the agreed performance target?
- What tolerance has been authorised?
- Which management level does the tolerance apply to?
- Who has authority to manage within it?
- What does the latest forecast show?
- Does the forecast remain within every relevant tolerance?
- Can corrective action be taken within delegated authority?
- If escalation is required, who must receive it?
- Is an issue, Exception Report, or Exception Plan appropriate at this level?
- Could the deviation affect the project’s continued business justification?
A structured review of these questions helps ensure that deviations are managed at the correct level.
Frequently Asked Questions
What is tolerance in PRINCE2?
A tolerance is the amount of permitted variation from an agreed plan target before the deviation must be escalated to the next management level.
What is the difference between a target and a tolerance?
A target is the intended result, while tolerance defines how far actual or forecast performance may vary from that result without requiring escalation.
What are the seven PRINCE2 performance targets?
The seven PRINCE2 performance targets are benefits, cost, time, quality, scope, sustainability, and risk.
What is stage tolerance?
Stage tolerance defines the limits within which the Project Manager can manage an authorised stage without escalating to the Project Board.
Who sets project tolerances?
The business layer establishes project tolerances, which define the authority delegated to the Project Board.
Who sets stage tolerances?
The Project Board establishes stage tolerances and delegates authority to the Project Manager to manage the stage within those limits.
What happens if a tolerance is forecast to be exceeded?
The situation is escalated to the appropriate higher management level. At stage level, the Project Manager prepares an Exception Report for the Project Board. At Work Package level, the Team Manager raises an issue with the Project Manager.
Is tolerance the same as contingency?
No. Tolerance defines the limits of delegated authority, while contingency generally refers to resources or provisions established to respond to uncertainty. A tolerance does not automatically make additional resources available.
Does PRINCE2 require every deviation to be escalated?
No. Variations can be managed within agreed tolerances and authority. Escalation is necessary when a forecast indicates that a relevant tolerance will be exceeded.
Is an Exception Plan always required?
No. The appropriate higher management level decides how to respond to an exception. An Exception Plan is prepared when requested as part of the chosen response.
Can a Project Manager exceed cost tolerance if the project is ahead of schedule?
Not automatically. Being within time tolerance does not independently authorise exceeding cost tolerance. Any changes must be approved within the appropriate management authority.
What Should You Explore Next?
PRINCE2 tolerances are one part of a wider approach to project control.
Understanding how they work alongside Management by Exception, stage planning, progress monitoring, and defined responsibilities can help you make sense of how PRINCE2 manages projects without unnecessary micromanagement.
If you’re studying PRINCE2 Foundation or Practitioner, these connections are also valuable when learning how the method’s principles, practices, and processes work together.
Want to understand how PRINCE2 controls projects without micromanaging them?
