In the interest of time I am going to make a few assumption concerning your contract.
1) You have a design build contract for a MILCON construction project
2) You have a change to the contract that is estimated at $7M to $8M that will result in a bi-lateral modification when negotiations are complete. The modification is sole source.
3) You meant TINA when you stated CINA since the question involves certified cost and pricing data
4) The original contract was competitively awarded
5) The contract contains all required FAR/DFARS clauses including the FAR 52.243-4, Changes
The Government thru the contract clauses including the Changes or even termination clauses has the authority to make changes to the contract after award. You asked several question concerning how the Government can question production rates, quantities, and scope. I cannot answer those questions without specific knowledge of the contract!
The exceptions to certified cost or pricing data are found in FAR 15.403-1
(a) Certified cost or pricing data shall not obtained for acquisitions at or below the simplified acquisition threshold.
(b) Exceptions to certified cost or pricing data requirements. The contracting officer shall not require certified cost or pricing data to support any action (contracts, subcontracts, or modifications) (but may require data other than certified cost or pricing data as defined in FAR 2.101 to support a determination of a fair and reasonable price or cost realism)—
(1) When the contracting officer determines that prices agreed upon are based on adequate price competition (see standards in paragraph (c)(1) of this subsection);
(2) When the contracting officer determines that prices agreed upon are based on prices set by law or regulation (see standards in paragraph (c)(2) of this subsection);
(3) When a commercial item is being acquired (see standards in paragraph (c)(3) of this subsection);
(4) When a waiver has been granted (see standards in paragraph (c)(4) of this subsection); or
(5) When modifying a contract or subcontract for commercial items (see standards in paragraph (c)(3) of this subsection).
Other circumstances where certified cost or pricing data is not required IAW FAR 15-403-2
(a) The exercise of an option at the price established at contract award or initial negotiation does not require submission of certified cost or pricing data.
(b) Certified cost or pricing data are not required for proposals used solely for overrun funding or interim billing price adjustments.
Since the contract is design build construction it cannot be a commercial acquisition. The modification is sole source so prices most likely cannot be based on "adequate competition". The price are also most likely not set by law or regulation. Since I am not familiar with this contract, I cannot be sure that the other exceptions apply. However, you have a sole source modification to a construction contract that is estimated at over $700,000. Unless the contracting officer has obtained a waiver IAW FAR 15.403-1 (b)(4), I can see no authority to not obtain certified cost or pricing data. As such, I know of no authority that allows the Government to use the contractors certified cost or pricing data submission to determine a proposed price "fair and reasonable", sign a bi-lateral modification, and then obtain an audit of the proposal in order to reduce the contract price.
Let me know if you have additional questions.