The FAR specifically states "A firm-fixed-price, level-of-effort term contract is suitable for investigation or study in a specific research and development area.", at FAR 16.207-2.  There is a cap of $150,000 on the type of contract, at FAR 16.207-3(d). The regulation is clear, and there is no additional guidance in the DFARS.   As the prime, you should inform the subcontractor of the $150,000 limit, and consult with the Contracting Officer to determine what  is the proper type of contract for the requirement. Based on the proposed dollar value, FFPLOE is not acceptable.