Congrats on the scholarship.
Yes, the Smith FA offer is going to get to what they think your family contribution is, based on CSS Profile, and they will use both merit aid and need based aid to achieve that. (they may use loans and work study too, not sure).
If she loses the merit aid, I agree need based aid would increase and the family will pay whatever the CSS Profile formula spits out…but that number can also change each year based on a family’s income/financials.