This study seeks a model for Knowledge Management in project based firms. The work process in these firms is getting on a contract with a client over a project which is to be delivered in a certain period of time and with a certain amount of budget. Depending on the type and specification of the project, the firm achieves or creates some knowledge which is almost tacit. The concern here is that this tacit knowledge is lost by the end of the project, whether due to time limitations and rush for delivering the project which makes it impossible for the firm to turn this knowledge into explicit; or it goes away with the workers since they are generally project-loyal not company-loyal. Based on the literature this study reveals that KM can act as powerful instrument for increasing project-based firms’ performance and hence raise their chances for absorbing more projects. However this is a two-sided fact; clients have more faith in those firms with loaded with high-level experiences while the chances are higher for satisfying clients in those firms which manage their knowledge gained from earlier projects.