What does Defined Cost mean under NEC4?

It is the cost base NEC4 uses for everything paid or assessed on cost. It has two definitions, depending on the main option. Under clause 11.2(23), for Options A and B, it is the cost of the components in the Short Schedule of Cost Components. That applies whether the work is subcontracted or not, and it leaves out 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. Disallowed Cost is cost the contract will not pay, such as cost without proper records. The schedules list the components by type, such as people, equipment, plant and materials, subcontractors, charges and design, and say how each is costed. The list is closed. A cost that is not a listed component is not Defined Cost, and the schedules treat it as included in the Fee. Under Options A and B, Defined Cost is used only to assess compensation events, because payment runs on the activity schedule or bill of quantities. Under Options C, D and E, it is what is paid at every assessment, and what compensation events are assessed on. The words whether the work is subcontracted or not matter. Under Options A and B, an event for subcontracted work is assessed from the components as if the work were done directly, not from the subcontractor's quote. Under Options C to F, amounts paid to subcontractors are a component in their own right, subject to Disallowed Cost. Four things go wrong. Head office overheads are added as a cost when they belong in the Fee. Quotation preparation time is claimed under Option A. A subcontractor's lump sum quote is presented as Defined Cost under Option A. And under the cost-based options, records too thin to back up the cost turn it into Disallowed Cost.