You will always earn miles for these tickets but without a little more information any of the other posts this thread could fit your situation. Particulars like can you upgrade the ticket with $$ or miles depends upon many factors, but your basic question is, "Yes, you earn miles on official US travel." As a contractor you have no restrictions on how you eventually use the miles. You may want to check with the contracting officer monitoring your program and see if it is possible for you to book your own travel and then to submit a travel voucher to be reimbursed. That way you can maximize earning with things like which airline to use, miles for credit card purchases, etc. Otherwise, they will book your travel using a fund citation and pay the bill through a blanket purchase order when the bill comes in. It also depends upon whether your travel is being paid from appropriated or non-appropriated funds (another question to ask the contracting officer).

If they are using SATO then your best bet is to sit down with the person that will be booking your travel and work with them on your travel. Otherwise, you will get whatever that person feels like booking and will usually be what is easier. They can use just about any US flag carrier and all of the airlines basically have similar prices in the official travel bucket, with some exceptions depending upon the markets flown.

In any case, you have to make sure that your FF account numbers get loaded into the record because SATO will not do that for you on official travel. And, in any case, ABSOLUTELY NEVER allow them to put you on a charter or MAC flight. You get no miles and they pack you in like cattle to slaughter. Active duty members have no say in that, but contractors and civilian employees DO NOT have to fly charter unless you are on a group tour, such as the music acts that do USO shows.