Exercising the FFP option priced above $7 Million triggers the reporting requirement. The funding execution does not affect this decision. As confirmation of such a reading, you can look to DFARS PGI 204.606(3)(vi)(B):

"The amount entered in the “Base and Exercised Options Value” for new awards shall be the total value (represented in U.S. dollars and cents) of all the exercised line items on the contract or order regardless of whether they are partially or fully funded."

The goal of DFARS 205.303(a)(i) is to "Report all contractual actions, including modifications, that have a face value, excluding unexercised options, of more than $7 million," without reporting the same work more than once. The term "face value" distinguishes this value from other references to contract value, which for various reasons, include potential additions to the face value of the action. Refer to "estimated contract value," at FAR 19.101(7)(i)(B); as well as "Base and all options value (Total Contract Value) used at DFARS PGI 204.606 (3)(vi)(C) as illustrative examples.

Finally, the Air Force clarifies the meaning of "face value" used in DFARS 205.303 for their service with their mandatory procedure at AFFARS MP5305.303 (b):

"In determining whether a contract action exceeds the DoD threshold, refer only to the face value of the current action. Do not include unexercised options in this calculation. For undefinitized contract actions, report the not-to-exceed (NTE) amount. Later, if the definitized amount exceeds the NTE amount by more than the DoD threshold, report only the amount exceeding the NTE. Use the estimated amount of the contract to determine if awards for requirements, time and materials, labor hours, and similar contracts meet the DoD threshold for public announcement. For indefinite delivery/indefinite quantity (ID/IQ) contracts, use the maximum amount of the ID/IQ contract, excluding unexercised options, if it exceeds the DoD threshold. If multiple awards are being made, and one award meets the threshold, announce all the awards. Do not report orders up to the estimated value, but after the estimated value of the ID/IQ contract is reached, report subsequent modifications and orders that have a face value of more than the DoD threshold. Do not report the same work twice."