Proper jump host configuration on AWX

Question

We have an AWX that needs to run playbooks on all servers within our lab.
There are some servers that can't be contacted unless using a bastion.
AWX can successfully run playbooks on the regular servers, but can't do it using jump host.
I will call the server that playbook will be run on it, client. Bastion will be referring to the server in the middle to connect to client.
The way I have it set up is that I have a set of username/password for the client that is saved as machine credentials in AWX.
I also have a custom credential type created as follow:
Input configuration

fields:
  - id: hostname
    type: string
    label: Jump server hostname
  - id: username
    type: string
    label: Jumphost username
  - id: sshkey
    type: string
    label: Bastion key.
    format: ssh_private_key
    secret: true
    multiline: true
required:
  - username
  - sshkey
  - hostname

Injector configuration

extra_vars:
  bastion_host: '{{ hostname }}'
  bastion_key: '{{ tower.filename }}'
  bastion_user: '{{ username }}'
  jumpserver_connection_configuration: >-
    -o ProxyCommand="ssh -o StrictHostKeyChecking=no  -o
    UserKnownHostsFile=/dev/null  -o PubkeyAuthentication=yes  -o
    ControlMaster=no -o PreferredAuthentications=publickey -i {{ tower.filename }} -W %h:%p -q {{ username }}@{{ hostname }}"
file:
  template: '{{ sshkey }}'

Then there is an inventory created that has IP of the client and below extra args:

ansible_ssh_common_args: >-
  {{ default_ssh_options }} -o PreferredAuthentications=publickey,password {{ jumpserver_connection_configuration }}
default_ssh_options: >-
  -o StrictHostKeyChecking=no  -o UserKnownHostsFile=/dev/null  -o
  PubkeyAuthentication=yes  -o ControlMaster=no -o
  PreferredAuthentications=publickey

A hello world job is created on this inventory with both credentials attached to it, which fails The failure log is uploaded here.