I can't understand how an engine can be out of tolerance and still be within performance certification. I believe if an engine is declared out of tolerance that's precisely because it cannot provide the certification performance level, or is it just a matter of wording ?
There are two separate issues here.
(1) Does it meet the absolute minima of the safety standards.
(2) Does it provide the performance values in the published operating data.
If the answer to (1) is "No", then clearly it's totally unacceptable. If the answer to (1) is "yes", but to (2) is "No", that's when a performance writedown is used.
A classic example here is the Harrier (okay, not a helicopter, but it does hover), where the deck-launch limits and hover performance limits are incredibly tight. There is actually a formal scheme whereby every limit is effectively written up or down from standard, and all the operating data reflects that. Clearly there are threshold limits at which the engine is rejected, and continuous monitoring is needed - but it's just an extreme example of the same thing.
G