Knowledgeable contracting professionals will give you different opinions on how to reimburse costs on a commercial contract. FAR Part 12 authorizes use of only firm-fixed-price, fixed-price with EPA, time-and-materials, and labor-hour contracts for commercial items. Some say that including a relatively minor cost reimbursement CLIN can still be compatible in a FFP contract (the "preponderance" issue). Others will say that not even one line item may be cost reimbursement without violating the intent of FAR Part 12. DCMA's Procurement Management Review team has written up the use of cost reimbursement CLINs in commercial contracts during its reviews.
I can neither support nor criticize the official position of the Army Contracting Command. For a more authoritative response, I recommend you raise the issue through channel to the Army's representative to the DAR Council, where is can be discussed and (hopefully) resolved.