All services rendered by the seller needs compensation. The fee refers to the monetary profit as a part of the compensation to a seller. The project management fee is always included in the project budget. It will be used to cover the costs that are associated related to the administration and management of the project.

There are two main types sellers charge their work and these include per hour or per project basis.  It is important for both the project owner and the seller to arrive at a consensus on what type of fee should be imposed on the project.

The project management fee should be documented in the contractual agreement and both the seller and buyer should both come to terms on the best type of fee system to adopt for the project. Moreover, it is also important to stipulate in the contract the exact amount of fee that should be paid to the seller as well as the fee schedule. It is also important to indicate whether the seller is also entitled to receiving other types of compensations such as incentives upon the completion of the project. Lastly, deductions on the fee should also be indicated in the contract.

Deciding whether an hourly or fixed rate is good largely depends on the type of project activities to be undertaken. For instance, long-term projects, as well as those who have hazy timeless, should be paid on an hourly basis. However, if the project is short-term and will not take too much of your time, a project-based fee is most beneficial.

It is important for the project owner and  seller to agree on the project management fee. This will put both entities in a win-win situation. Agreeing to the payment terms is also a great way to achieve good relationship during the entire project lifecycle.

This term is defined in the 5th edition of the PMBOK.