Out-of-policy reservations fall outside of your company's stated policy. For example: company policy states that travelers can only rent midsize-class cars, but a traveler on a certain trip must transport multiple guests plus special equipment and therefore requests a full-size car or utility vehicle. He would be allowed to do so, but might need to get approval or enter a reason code for this request; his Travel Manager might also receive automatic notification.
The three main ways policy is enforced are:

Travel Managers define the custom out-of-policy reason codes for Air, Hotel and Car for their companies. Users purchasing out-of-policy travel may be required to select a code from their company's list.

Examples of reason codes for airline exceptions as seen by users.
To create your reason codes, go to Power Tools → Policy → Reason Codes.
To require reason codes be entered, go to Power Tools → Policy → Traveler Groups → Enforcement (next to the traveler group name).
To require manager e-mail notification by traveler group, go to Power Tools → Policy → Traveler Groups → Enforcement (next to the traveler group name).
To require manager e-mail notification by individual traveler, go to Manage Users → User List → [Traveler Name] → Update e-mail and notification settings.