What does Defined Cost mean under NEC4?

Defined Cost is the cost base that NEC4 uses for everything that is paid or assessed on cost, and it has two definitions depending on the main option. Under clause 11.2(23), for Options A and B, Defined Cost is the cost of the components in the Short Schedule of Cost Components, whether the work is subcontracted or not, excluding the cost of preparing quotations for compensation events. Under clause 11.2(24), for Options C, D, E and F, it is the cost of the components in the Schedule of Cost Components less Disallowed Cost. The schedules list the components by category, such as people, Equipment, Plant and Materials, Subcontractors, charges and design, and state how each is costed. The definition is closed: a cost that is not a listed component is not Defined Cost, and the schedules say that such costs are treated as included in the Fee. Under Options A and B, Defined Cost is used only to assess compensation events, because the Contractor is paid on the activity schedule or the bill of quantities. Under Options C, D and E it is what the Contractor is paid every assessment through the Price for Work Done to Date, and it is what compensation events are assessed on. The words whether work is subcontracted or not mean that under Options A and B a compensation event for subcontracted work is assessed from the components as if the Contractor did the work, not from the Subcontractor's quotation. Under Options C to F, amounts paid to Subcontractors are themselves a component, subject to Disallowed Cost. What goes wrong: head office overhead added as a cost when it belongs in the Fee; quotation preparation time claimed under Option A; a Subcontractor's lump sum quote presented as Defined Cost under Option A; and, under the cost based options, records too thin to justify the cost, which makes it Disallowed Cost.