In PRINCE2 7, the Issues practice manages deviations from the project baseline through rigorous governance, utilizing the concepts of Change Budget and Change Authority.
A **Change Budget** is a financial tolerance allocated specifically to fund authorized Requests for Change (RFCs). It is distinc…In PRINCE2 7, the Issues practice manages deviations from the project baseline through rigorous governance, utilizing the concepts of Change Budget and Change Authority.
A **Change Budget** is a financial tolerance allocated specifically to fund authorized Requests for Change (RFCs). It is distinct from a contingency fund; it is not intended to cover overspending on original work or delays. Instead, it provides a strictly monitored 'bank account' to pay for new requirements or modifications to baselined products. If a proposed change exceeds the available Change Budget, the Project Manager must escalate the issue to the Project Board via an Exception Report, as this constitutes a deviation beyond agreed tolerances.
The **Change Authority** refers to the person or group authorized to make decisions regarding these changes. While the Project Board holds ultimate accountability for project success, reviewing every minor issue is inefficient. Consequently, the Project Board may delegate decision-making power. The parameters for this delegation—such as cost limits, severity levels, or specific technical domains—are defined in the Change Management Approach. For example, a Project Manager might be authorized to approve low-cost changes, while a dedicated Change Authority group handles medium-impact changes, leaving high-risk decisions to the Project Board.
Functionally, the Change Authority acts as the gatekeeper of the Change Budget. When an issue arises, the Change Authority assesses its impact on the Business Case and benefits. If they approve the change, the cost is deducted from the Change Budget. This system prevents uncontrolled scope creep by ensuring that every modification is financially accounted for and authorized by the appropriate management level, preserving the project's continued business justification.
Change Budget and Authority
Why is it Important? In any project, change is inevitable. Without a structured mechanism to handle these changes, the Project Board would be overwhelmed by every minor modification request, causing delays and bottlenecks. The concepts of Change Budget and Change Authority provide a governance structure that allows for efficient decision-making while maintaining financial control. They ensure that funds are available for beneficial changes without compromising the original project budget designated for the agreed scope.
What is it? Change Budget: This is a sum of money specifically set aside (ring-fenced) to fund approved Requests for Change. It is distinct from the main project budget and strictly distinct from cost tolerance. While tolerance is used to manage deviations from the plan (e.g., things costing more than expected), the Change Budget is used to pay for new requirements or changes to the baseline.
Change Authority: This refers to the person or group to whom the Project Board delegates the responsibility for considering and approving requests for change and off-specifications. While the ultimate control rests with the Project Board, delegating this authority prevents them from micromanaging every issue.
How it Works During the Initiation Stage, the Project Board agrees on the Issue Management Approach, which details: 1. Delegation: Who acts as the Change Authority. This could be the Project Manager (for low-cost changes), a Change Control Board (for technical changes), or remain with the Project Board (for high-impact changes). 2. Limits: The financial limits or severity levels that the Change Authority can approve. 3. Budget: The specific amount of money allocated to the Change Budget.
When an issue (Request for Change) is raised, the impact is analyzed. If the cost of the change falls within the Change Authority's limit and there is sufficient Change Budget available, they can approve it immediately without escalating to the Project Board.
Exam Tips: Answering Questions on Change Budget and Authority To answer Practitioner questions correctly, look for the following clues in the scenario:
1. Budget vs. Tolerance This is the most common trap. If the scenario describes a task taking longer or costing more than planned, this eats into Tolerance. If the scenario describes a stakeholder asking for a new feature or a modification to an agreed product, this requires funding from the Change Budget.
2. Check the Delegated Limits Scenarios often provide an 'Issue Management Approach' document. Check the dollar value of the change against the authority limits. If a change costs £5,000 and the Change Authority is only authorized up to £2,000, the decision must be escalated to the Project Board.
3. The Project Manager's Role Do not assume the Project Manager can approve changes. In PRINCE2, the PM only has this authority if it has been explicitly delegated to them by the Project Board. If the question asks who approves a change, look for the specific Change Authority defined in the scenario, not just the PM.
4. Exhausted Budget If the Change Budget is used up, the Change Authority cannot approve further changes that require funding, even if they are within their financial approval limit. They must escalate the request to the Project Board to ask for more budget.