The task is to fill in the blanks with the correct form of the verb "to be" and the verb "do" in the present continuous tense.
The present continuous tense is used to describe actions that are happening now. The structure is: subject + is/are/am + verb-ing.
Since the subject is "They", the correct form of the verb "to be" is "are". The verb "do" becomes "doing".
So, the answer is:
They are doing the school project together.