Which method of compensation for CM services is inconsistent with the agency CM's fiduciary relationship to its owner?

Which method of compensation for CM services is inconsistent with the agency CM's fiduciary relationship to its owner?

• A. Fixed fee
• B. Percentage of construction costs
• C. Multiple of direct personnel expenses
• D. Professional fee plus expenses

Answer: (B)

The main idea is to protect the owner’s interests through the CM’s fiduciary duties. An agency CM must remain objective and act to minimize cost and risk for the owner, not to increase their own fee by inflating project costs. Tying the CM’s compensation to construction costs creates a direct incentive for the CM to influence or overlook cost growth, which undermines trust and objectivity in the owner–CM relationship. Fixed fee, professional fee plus expenses, or a multiplier of direct personnel expenses are structured in ways that can be defined, audited, and controlled, helping keep the CM’s actions aligned with delivering the project efficiently and within the owner’s interests. They do not inherently reward higher construction costs, unlike the compensation method tied to the total project cost. So, the option that conflicts with the fiduciary relationship is the one that pays the CM a percentage of construction costs, because it can create a built-in incentive to favor higher costs over prudent cost management.

The main idea is to protect the owner’s interests through the CM’s fiduciary duties. An agency CM must remain objective and act to minimize cost and risk for the owner, not to increase their own fee by inflating project costs. Tying the CM’s compensation to construction costs creates a direct incentive for the CM to influence or overlook cost growth, which undermines trust and objectivity in the owner–CM relationship.

Fixed fee, professional fee plus expenses, or a multiplier of direct personnel expenses are structured in ways that can be defined, audited, and controlled, helping keep the CM’s actions aligned with delivering the project efficiently and within the owner’s interests. They do not inherently reward higher construction costs, unlike the compensation method tied to the total project cost.

So, the option that conflicts with the fiduciary relationship is the one that pays the CM a percentage of construction costs, because it can create a built-in incentive to favor higher costs over prudent cost management.