This isn't a bug, as much as it is an unexpected order of operations.
Squad size is usually one of the things that has the highest priority. So the two levels of upgrade have a different rank requirement (= a single unit in your barracks has the needed rank).
I forget the correct ranks, I thought it was Sergeant for Size 1 and Major for Size 2.
This means there's a notable difference in the time when it's available, and you'd naturally get Size 1 first.
However, if you only built the GTS after already having a major, both options would be available.
It could've been prevented by making Size 1 a requirement for Size 2, or to have the first upgrade (regardless which one) cost less than the second upgrade.
However, in the end it's all the same, as you'll be meeting the requirements and paying the same cost. The only difference you would encounter is that you'd maybe pay more for the first, and then get that discount on the second. Doesn't really break the game, this just seems like a minor UI oversight.