The Six Areas of Project Tolerance:

Prince2 and Tolerance

Using Tolerances within Prince2

One of the primary methods that is used to deal with day to day issues that occur in a project or any endeavour is “tolerance”.  By allowing for tolerance a project can proceed without halting every time a change occurs.

KEY CONCEPT!

Tolerance is critical to the concept of management by exception. An exception occurs when a process or stage exceeds or is forecast to go out of tolerance, at which point it would be escalated to the Project Manager and to the project executive for an exception plan to be agreed or project closure to occur.

Standard Tolerances:

The standard tolerances are preferred where it comes to utilisation of tolerances; simply because they do not tend to impact on the product specification or the project aims.

Time:

Time tolerance is the difference between the agreed time it will take to accomplish something and the allowance granted for “unforeseen” requirements.  For instance time tolerance could be utilised if it takes longer to solve a design issue than previously planned for.

Cost:

Cost tolerances are the difference between the sum allocated for producing a product and the allowance given to cope with additional costs.  For instance the price of raw materials may drastically rise on a project so there should be some tolerance for this, however if the price rises so high that the business case is affected and costs go out of tolerance then an exception occurs.

Non Standard Tolerances:

Non standard tolerances are the least preferred and should be used when there is no option for additional time or cost tolerance.

Scope Tolerance:

Scope tolerance is the tolerance in t terms of product/project functionality.  For instance if you cannot utilise time or cost tolerances you may have to sacrifice on project scope. 

For example do we sacrifice a “would like” feature of an application or tolerate that a particular component will not be able to perform a particular function.

Benefit:

Tolerance in terms of benefit is in terms of tangible and intangible benefits:

In terms of tangible benefits; we are generally talking about some form of ROI (return on investment) this may simply be the making of profit or the capturing of market share.

In terms of intangible benefits an example would be reputation, for instance participation on formula1 returns a benefit in terms of perceived technical excellence just for being there, if you go in with the intention of winning this would be said to be maximum perceived benefit.  If however constraints occur you may decide to compromise on not winning recognising that just for taking part you will gain some reputation for technical excellence.

Quality:

Probably the least preferred option if time and cost constraints dictate it may be necessary to compromise on quality.  For instance a particular product may have to be made from plastic for speed sake when it was originally planned to be made from cherry wood for luxury.

Risk:

Depending on the options available it may sometimes be required to accept higher risks in the project than originally planned.  For instance if your product is the development of a new piece of building technology, risks may increase if for instance the housing market drops and the item may no longer be required or profitable.  The risk needs to be judged within tolerances; however some risks should never be tolerated for instance health and safety risk.

Note: that the tolerance for risk can also be thought of as risk appetite, or how much are you willing to gamble to ensure success.

What this means practically:

In reality there are no hard and fast rules when it comes to tolerance, experience and a feel for the situation will guide your decisions.  What may seem as an inviolable tolerance such as cost can disappear, money can be found.  Barriers such as time can be more flexible than you supposed, good communication can pay dividends if you are hit by a supply problem outside of your control.