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Final Approach
I believe the main point of Appendix B to The Instrument Procedures Handbook is to emphasize that "flight technical error" is not taken into consideration, at least beyond a point. In its example, at 51 nm from a NAVAID, acceptable PTS standards together with allowable navigation equipment error place you as much as 6.4 nm outside the protected airspace of the airway.The error budget allows for flight technical error, altimeter errors, instrument errors (e.g., your CDI showing on-glidepath vs actually being on-glidepath).
I don't remember the error budget allocation (and it would take me a while to reconstruct it) for each error source.
In the case of the ILS brought up by Cap'n Ron, an "allowable" altimeter error of 75' doesn't equate to the loss of all obstacle clearance as he first suggested, but it can certainly result in less of it. On the other hand to lead folks to think Terpsters account for "every error" is misleading too. I'd say the best policy is to assume nothing and keep the needles centered.
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