Is there Regulation and or Policy that limit a UCA to twelve (12) months or any specific period of performance cap?
It appears you did “glazed over” a couple of critical citations during your research.
If you look more closely at FAR 6.302-2(d)(1)(ii), it reads:
“May not exceed one year, including all options, unless the head of the agency determines that exceptional circumstances apply. This determination must be documented in the contract file.” (bold and italics added by me for emphasis)
Note: 10 U.S.C. §2304 also mentions the 1 year limitation, see para (d)(3)(ii).
FAR 6.302-2(d)(2) discusses what you must do in the event you modify the contract in the future and the mod increases the period of performance (PoP) past a year.
The DFARS does not provide any implemental or supplemental changes or guidance to the paragraphs above. However, the AFFARS 5306.302-2(d)(1)(ii) does tell you who is authorized to approve determination if it is necessary to have a longer than 1 year PoP.
So, the PoP limitation is strictly because you were using FAR 6.302-2 as the J&A authority and not because this was a UCA or letter contract.