Is it appropriate to pay an REA utilizing the final option period pricing?
Is it even allowable to apply a single REA to both the 2008 and 2013 contracts?
What type of proof does the Government typically require to prove that items were missing/damaged?
This REA scenario was generated by terms within a PWS instead of a specific FAR clause that limits the number of days for REA submissions (i.e. Changes clause). The underlying timing issue arose because the contract was apparently silent on the frequency of inventories and reimbursement. Both the Government and the contractor may have been due some level of compensation for lost/damaged linen per the terms of each contract. At a minimum, the close-out effort for the 2008 contract (which includes steps that address government property, contractor's closing statement, statement of completion, and final invoice) should have been a reminder for both parties to address this issue. With the limited facts provided, I see a strong position for the Government on the initial (closed) contract and a strong position for the contractor on the second contract. In the end, the KO will need to review all the facts, confer with legal, and try to negotiate a reasonable settlement.
Answers to the (3) specific questions:
Yes, I believe the current option period pricing is appropriate for pricing this REA because the PWS language you provided states that the linen will be replaced at the linen charge in the schedule. Although the Government didn't anticipate such a delayed request, I believe both parties assumed the "current" linen charge in the schedule would be used at the time of a request.
Each contract is separate and the REA from the contractor couldn't be treated as a single REA for both the 2008 and 2013 contract. In fact, review FAR Part 33 dealing with disputes/claims when evaluating the closed 2008 contract.
The PWS and even the QASP could have addressed the documentation required to substantiate a linen REA. Periodic linen inventories and linen markings (with some COR involvement) would be essential in determining when linen was lost/damaged and which party owned the lost/damaged linen.