In a fixed fee compensation arrangement, what does an agency CM share in if costs are lower than planned?

In a fixed fee compensation arrangement, when costs come in lower than planned, the agency construction manager (CM) benefits by sharing in the profit generated from those savings. This is because the fixed fee is predetermined and does not change with the actual costs incurred. However, if the costs are managed efficiently and come in below budget, the CM can realize additional gains as a result of the cost savings, which can enhance their overall profit from the project.

This outcome encourages effective budgeting and cost control by the agency CM, as they have a financial incentive to keep expenses minimized. The structure of this arrangement not only aligns the interests of the CM with the project's financial performance but also promotes collaboration and proactive management throughout the construction process. Thus, the CM has the potential to share in the benefits of reduced costs, truly realizing the profit generated from the savings achieved.