What you need to ask them is that if they do an audit and find that you under priced things would they pay you the extra, and very quickly they will tell you no.
As you say, under option A that is only for compensation events where you should assess the cost including any discounts you would get - i.e. they are paying you your actual forecast cost plus a fee on top.
Option C they would be correct, as you would be paid actual cost for all Defined Cost, but not for option A. That would be called "having your cake and eat it". What do they even have the right to audit under option A apart from elements of compensation events - as it is a lump sum price?