Last mile activities are defined as activities which a contractor has to complete at the very end of the project. Only after the competition of last mile activities that a customer will accept the completion of project and release payment for the work. While working for EPC contractors, I have seen that there is very little or absolutely no focus on last mile activities. The reflection of which can be seen in their cash flow dampening also. EPC contractors are very capable of core work which constitutes nearly 80-90% of the milestone work. But the last mile activities are not very important to them as they are not their core competencies and they are dependent on outside firms. So they do not staff it properly or plan equipment for it in their budget.
Some examples of last mile activities are -
-
giving electrical connections to the site
-
connecting instruments with the central station
-
putting insulation over the pipes
-
getting customers & principal customers for a walk around to give punch points & also the closure of punch points.
-
performing some special QC tests
Usually, EPC firms do not have a dedicated team for doing last-mile work as they feel that sustaining such teams is a waste of money. They are also correct in their thinking that the last mile work needs to be completed at the end of the project and having a full blown team for such activities is not justified.
In some places I have seen EPC contractors having no more than a one-person hired full time for focusing on last mile activities. But when the last mile activities need focus, usually the man strength needs to be increased with temporary staff or has to be outsourced. For both these aspects the a strong project management is needed along with capital support from the leadership team.
If not done properly, the customers will see only 90% milestone completion in the project and stop EPC firm’s payments. It gets peculated as cash flow problem for the EPC firms, which has a cascading effect on other project activities being done by EPC contractor. They keep grumbling with the customer for nonpayment and also deteriorate their health.
The solution to this problem is simple, follow the money even though it is not in the comfort zone of EPC firm’s capabilities. Plan proper milestones for last mile activities and budget adequate resources for it. The advantage EPC contractors have by proper execution of last mile activities is accelerated cash flow which will result in making their organisation self sustaining.