PRINCE2 7 Foundation · Study lesson 28
Use forecasts to trigger decisions
Recognise the boundary of delegated authority before it is crossed.
11 minute study lesson · Practices · Original learning material
What you will understand
- Compare a forecast with a target and its permitted deviation.
- Identify the management level that must receive an escalation.
- Distinguish an exception report from an authorised exception plan.
The idea
A project can be inside its budget today and still be forecast to finish beyond the authorised limit. Management by exception is designed for that situation. Tolerance describes the permitted deviation from a performance target. It grants room to manage; it does not grant permission to redefine the target whenever the outlook becomes uncomfortable.
PRINCE2 considers seven performance aspects: time, cost, quality, scope, benefits, risk and sustainability. A tolerance must make sense for the aspect being controlled. Cost may have a maximum amount; quality may have a permitted measurement range; scope may distinguish mandatory products from agreed flexibility. Quality tolerances belong in the relevant product descriptions. Do not assume every aspect uses the same percentage or appears identically at every planning level.
For a simple cost example, a stage target of £40,000 with an upper tolerance of £3,000 permits a forecast up to £43,000. A forecast of £42,500 is within that upper boundary. A forecast of £43,800 is beyond it, even if expenditure to date is only £10,000. Lower limits, where agreed, also matter. Read the actual boundaries and compare like units rather than guessing from an overall confidence colour.
Authority is delegated through management levels. The commissioning business sets project tolerances. The board authorises stage tolerances for the project manager. The project manager agrees work package tolerances with the team manager. If a team forecasts exceeding its work package limits, it alerts the project manager. That does not automatically mean the whole stage is outside tolerance: the manager first assesses the effect on the stage.
When a stage tolerance is forecast to be exceeded, the project manager presents an exception report to the board, with the situation, effects, options and recommendation. If project-level tolerance is threatened, the board must refer that issue to the commissioning business for the required authority. Corrective action within existing authority differs from asking a higher level to change the basis on which work may continue.
An exception report communicates the forecast problem; an exception plan describes a proposed replacement for an affected plan if the appropriate authority requests it. Preparing a plan does not authorise it. The replacement becomes the control baseline only after approval by the authority responsible for that level. Keep the original forecast visible, consider continued justification and make proportionate arrangements for any work while the decision is pending.
Forecast before you run out of authority
| Evidence | Conclusion |
|---|---|
| Stage plan £80,000; upper tolerance £4,000 | The permitted upper stage cost is £84,000. |
| Actual spending £50,000; latest total forecast £86,000 | The forecast exceeds the limit despite lower current spending. |
| Forecast breach at team level | Raise it to the project manager. |
| Forecast breach at stage level | Raise it to the project board. |
An original fictional example
Fictional case: a low-energy greenhouse
A greenhouse stage has a carbon target of 18 tonnes with a maximum permitted level of 20 tonnes. A supplier substitution changes the forecast to 21 tonnes. Cost and completion date remain within their limits, and installation has not started.
The decision
The project manager checks the evidence and escalates the forecast sustainability breach to the board with options. The manager does not treat spare budget as permission to offset an unrelated tolerance.
Why it makes sense
Each applicable performance boundary matters. Forecasts trigger control before an actual overshoot, and one favourable measure cannot silently cancel a breach in another.
A common confusion
The mistaken idea: An exception exists only after an authorised limit has actually been exceeded.
The distinction: A credible forecast beyond tolerance calls for escalation before the overshoot occurs.
Compare the expected finish with the authorised boundary, not just today’s spending.
Points to remember
- A forecast breach matters even when current actuals remain within limits.
- Escalate through the level that granted the affected authority.
- An exception report informs a decision; an approved exception plan replaces a plan.
Your takeaway
Read the tolerance for the relevant performance aspect and planning level. Forecast honestly, escalate at the right boundary and obtain authority before replacing the baseline.
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