The one thing you should never do in a document of this type is use the button marked with a red square in the attached image.
This button is fine for quick and dirty documents that you don't really care about, but for anything important you need to use the button to the right of it and define a list style to control the numbering. The process for doing this is detailed in the links to Shauna Kelly's directions in the post above.
The document you attached contains styles that clearly don't belong, so, for future use, I suggest you start from scratch and create a template (.dotx) specifically for proposals with all the necessary styles defined properly. You can be much more productive if all the setup has been done in advance.
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