Let us consider People first :
The opening sentence of 1. People states :
"The following components of the cost of
- people who are directly employed by the Contractor and whose normal place of working is within the Working Areas
So if the people's normal place of working is within the Working Areas, then they are an allowable or Defined Cost in the first place and there is no bullet point in the definition of a Disallowed Cost which says they can be disallowed.
You do not give any reasoning for the PM disallowing the cost of Equipment, but the basic logic stays the same.
Consequently, the Project Manager appears to be contractually, as well as morally, wrong to disallow such costs.