What Boards Should Be Asking About Their Capital Projects Right Now
Key Takeaways
- McKinsey's review of more than 300 billion-dollar-plus projects found average cost overruns of approximately 80% and schedule delays of around 50%. These figures have not meaningfully improved over decades of investment in project management capability.
- In mining and metals specifically, McKinsey MineSpans analysis shows 83% of recent major projects face cost and schedule challenges - with capex overruns exceeding 40%.
- The data Boards receive on capital project status is frequently not aligned with reality. McKinsey identifies distressed projects as typically relying on payment-based reporting rather than actual work performed, creating a structural gap between what is reported and what is happening.
- Only 30% of CEOs have full visibility into their company's exposure to political risk across operations, markets, and suppliers, according to EY-Parthenon's 2025 Geostrategic Outlook.
- Four questions - on reported vs observed status, cost baseline validity, supply chain and geopolitical exposure, and the independence of recent assurance activity - represent the minimum standard for effective Board oversight of capital programmes in the current environment.
Approximately $24 trillion in capital is expected to be deployed across heavy industrial projects over the next five years, with energy and manufacturing accounting for a significant share, according to McKinsey. In the EMR sector specifically - oil, gas, mining, and energy transition - the volume of capital programmes currently in execution or approaching sanction is among the largest seen in a generation.
Yet the delivery performance data has remained consistently poor. McKinsey's analysis of 532 major projects, 62% of which were valued at over $1 billion, found average cost overruns of 79% and schedule delays of 52% from initial estimates. In the mining and metals sector, McKinsey MineSpans data shows 83% of recent major projects have faced cost and schedule challenges. These figures have not materially improved over 20 years of increasing investment in project management methodology, technology, and reporting.
The gap between capital committed and value delivered is not primarily a project management problem. In most cases it is a governance problem - specifically, a gap between what Boards are told and what is actually happening on the ground.
This article sets out four questions that EMR sector Boards should be asking about their capital projects right now.
1. Does Our Reported Project Status Reflect What Is Actually Happening?
McKinsey's research on distressed megaprojects identifies a structural reporting problem that rarely surfaces in Board discussions: the data used to track project progress is frequently outdated, typically relying on payments to contractors rather than on actual work performed. The consequence is that different parties can hold materially different views of the same project's cost and schedule status, and there is no common understanding of performance.
This is not a secondary observation. McKinsey identifies it as one of the defining characteristics of projects that have already moved beyond the point of low-cost intervention. A project can appear to be tracking to schedule on the basis of invoice flow, while on-site productivity, contractor performance, and earned value tell a different story entirely.
Boards should ask their project teams directly: how is progress being measured? Is the reported completion percentage based on invoices paid, defined milestones reached, or independently verified earned value? If the answer is the first of those three, the Board does not have a reliable picture of project status - and the gap between reported and actual performance is likely wider than the reporting suggests.
For a broader perspective on the risk frameworks that support this kind of oversight, see our guide to understanding risk management strategies in mega-projects.
2. Has Our Cost Baseline Been Stress-Tested Against Current Market Conditions?
Capital projects in the EMR sector are authorised on business cases built at a specific point in time. The cost baseline reflects the market conditions, procurement assumptions, and risk estimates that applied at sanction. It rarely reflects the conditions under which the project is actually being executed.
This has always been a governance challenge. In the current environment, it is an acute one. US tariff policy introduced in 2025 has created significant cost volatility across steel, aluminium, copper, and critical minerals supply chains. Logistics costs remain elevated. Skilled labour markets in major project jurisdictions are tight. A cost baseline established during a different market environment may bear little resemblance to the actual delivery cost profile of the project being executed today.
The question Boards should ask is not whether a project is tracking to budget - it is whether the budget remains a valid reference point. IPA - Independent Project Analysis, whose database spans more than 24,000 capital projects, identifies premature cost commitments made before scope is adequately defined as a major driver of overrun. Once a budget has been formally approved and communicated, the political and reputational cost of revising it frequently exceeds the practical cost of proceeding with a baseline that cannot be met. Boards should be explicitly testing whether this dynamic is operating in their own programmes.
Our post on strategies to ensure business certainty in the energy sector covers the broader framework for protecting capital programme outcomes under volatile conditions.
3. How Exposed Is Our Portfolio to Supply Chain and Geopolitical Risk?
EY-Parthenon's 2025 Geostrategic Outlook reports that only 30% of CEOs have full visibility into their company's exposure to political risk across operations, markets, and suppliers. BlackRock's Investment Institute, in its March 2026 Geopolitical Risk Dashboard, describes the current period as potentially marking the start of a new geopolitical era, characterised by the restructuring of global trade relationships and accelerating fragmentation.
For EMR capital projects, this is not an abstract macroeconomic observation. Projects dependent on fabrication from a concentrated geography, critical minerals from a narrow supplier base, or logistics routes through constrained chokepoints carry embedded supply chain risk that is frequently not visible in standard project reporting. Research from the Federal Reserve Bank of Boston shows that a one-standard-deviation increase in the geopolitical risk index can reduce firm investment rates by 1 to 1.6 percentage points over a six-quarter horizon - an effect that is more pronounced and more persistent in industries with high geopolitical exposure, which includes most of the EMR sector.
Boards should ask whether their project risk registers reflect current geopolitical realities rather than those that applied at the time of project approval. Specifically: how would procurement strategies be affected by further trade fragmentation or tariff escalation? Which supply chain concentrations are currently unmitigated? And is the risk register being updated to reflect the pace at which conditions are changing, or is it a document produced at FEL 2 and reviewed annually?
Our post on stage-gate governance in infrastructure programmes covers the decision-gate structures through which these risk updates should be formally assessed.
4. When Did We Last Commission an Independent Review - and Was It Genuinely Independent?
Internal project teams are structurally limited in their ability to challenge their own assumptions. This is not a failure of individual competence. It is a consequence of optimism bias - the well-documented cognitive tendency to underestimate costs and overestimate delivery confidence - combined with the authority gradients and commercial pressures that make challenge socially and professionally costly within project organisations.
The UK Infrastructure and Projects Authority has embedded independent Gateway Reviews as a mandatory element of public sector project governance precisely because internal review cannot reliably replicate the function of genuinely external assessment. The same principle applies in private sector capital delivery.
The word "independent" carries specific weight here. A review conducted by the same organisation's internal audit function, or by an advisory firm with a commercial relationship to the project's delivery or to the owner team, does not meet the standard of independence that meaningful governance requires. Independence requires no stake in the project's outcome - and a mandate that explicitly includes the authority to surface findings that challenge the current direction.
For major capital programmes - particularly those approaching or past FID - an annual independent assessment should be treated as a governance baseline, not an exceptional intervention.
The Board's Role in Closing the Gap
The four questions above share a common thread: they are each oriented toward the gap between reported status and observed reality. This gap is not sector-specific, geography-specific, or project-type-specific. It is endemic to capital project delivery - and it is the gap that independent assurance exists to close.
Boards that limit their engagement to reviewing management-prepared project reports are not fulfilling the oversight function that capital investment demands. EY's survey of more than 350 board members across the Americas identified capital strategy as the second-highest board priority - but priority and effective oversight are not the same thing. Asking the right questions before a project reaches a crisis is the distinction that separates active governance from passive endorsement.
The cost of the intervention rises sharply with each phase of the project lifecycle. IPA's research shows that a cost-of-change ratio of 1x at inception becomes 10x during execution and 100x or more post-delivery. For Boards, the window in which independent challenge is both feasible and affordable narrows continuously as programmes progress. The time to ask these questions is before the answers become expensive.
If your Board needs an independent, practitioner-led assessment of a capital programme's reported status, cost baseline, or risk exposure, PDAS provides the governance and assurance function that internal teams cannot replicate.
Book a discovery call with our team.
References
McKinsey & Company (2025). Don't Cancel or Coddle At-Risk Capital Projects - Challenge Them. mckinsey.com
McKinsey & Company (2023). Seize the Decade: Maximising Value Through Pre-Construction Excellence. mckinsey.com
McKinsey & Company (2024). The Capex Crystal Ball: Beating the Odds in Mining Project Delivery. mckinsey.com
McKinsey & Company (2015). Megaprojects: The Good, the Bad, and the Better. mckinsey.com
EY-Parthenon (2025). 2025 Geostrategic Outlook. ey.com
EY Board Matters (2025). How Board Oversight of Capital Allocation Can Drive Strategy. ey.com
EY (2025). Three Ways to Transform Board Oversight of Geostrategic Risk. ey.com
IPA - Independent Project Analysis (2025). What Is the Key to Delivering More Predictable Projects? ipaglobal.com
BlackRock Investment Institute (2026). Geopolitical Risk Dashboard. March 2026. blackrock.com
Federal Reserve Bank of Boston (2025). How Firms' Perceptions of Geopolitical Risk Affect Investment. bostonfed.org
World Economic Forum (2025). Global Risks Report 2025. weforum.org
Infrastructure and Projects Authority (IPA, UK). Government Gateway Review process. gov.uk
