Which of the following describes a scenario that could lead to a conflict of interest?

A project manager receiving compensation from both the client and contractor illustrates a classic conflict of interest situation. In this case, the project manager's loyalty may be divided between the two parties, leading to potential biases in decision-making. Their obligation to the client could conflict with their financial interest in the contractor, which may result in actions that do not align with the best interests of either party or the project as a whole. Such dual remuneration can compromise the integrity and impartiality that are essential in contract administration and project management, as the project manager may favor one party over the other based on personal gain rather than the project's objectives.

In contrast to this, the other scenarios do not inherently create a conflict of interest in the same manner. Initiating a project without a contract might lead to various legal and operational issues but does not necessarily create a conflicting allegiance. A sudden change in contract terms might lead to disputes but does not directly imply divided loyalties. Similarly, two firms bidding for the same contract might suggest competition but does not indicate any conflicts of interest unless there are undisclosed relationships or prior agreements affecting their bids.