The Last Planner system was initially focused only on production control functions, trying to improve the match between SHOULD and CAN, CAN and WILL, and WILL and DID. A partial specification of SHOULD was introduced into Last Planner practice in 1998 with the pull planning of phase schedules. The next logical extension of Last Planner is to the planning of master schedules and the project execution strategies of which they are a part. One of the key elements in that extension is managing variation, both negative and positive (risks and opportunities). This paper offers a framework for managing variation. Subsequent papers will apply that framework in processes for producing project execution strategies and master schedules.