@thezman007 I would say the pcap file you provided is a model of how a proxy dhcp and dhcp server should interact. The first part of the pcap is perfect.
The second part starting at second #19. The client issues a dhcp discover and the dnsmasq answers right away, the client had to issue a second discover request before the main dhcp server @ 2.2 address responded. This pattern is repeated at the end of the pcap (you can see this if you look at the pcap with wireshark).
So this is only me reading the tea leaves but I think there is something up with your main dhcp server because its being slow to respond to dhcp requests. Understand I only can see 25 second pcap but I find it abnormal. When things go sideways (and it probably will) get a pcap of the failure, that’s going to tell us what’s missing.
I’m going to remove your pcap from your post because its not needed now.