How Practitioners Set Share Fraction in Cost-Plus-Incentive-Fee Management Services Contracts

The paper studies the reasons for the services procurement of owners, and indicates that the PM/PMC is a professional services company which provides the whole process project management services with a high degree of integration for the interests of owners. Most Scholars have studied the incentive coefficient in the cost plus incentive fee contract between owner and contractor. While the research about the incentive coefficient in the CPIF contract between client and PM / PMC was studied less. The paper establishes an information dynamic game model that PM/PMC colludes with contractor based on the game theory. It analyses how to make certain the incentive coefficient in the CPIF project management services contract. Research findings indicate that it should be prevented the collusion of PM/PMC and contractor and adopted a progressive manner when determining the incentive coefficients. The incentive coefficient should be reduced accordingly with increase of a fixed remuneration rate in the CPIF management services contract.