The best time to prune lavender is after all chance of frost has passed, so that would be early March or so. If you prune them in July, you’ll prune off the year's blooms-in-progress, even though it may have bloomed twice in a season before.

Here are some other considerations:

1. Your lavender will try to resume (or exceed) its current size in the future
2. Planting more plants between them may make all of the plants vulnerable to fungal diseases. This is due to inadequate air circulation. It is recommended that your plants be at least 2 to 3 feet apart and 3 to 6 feet between rows.

Here is a Colorado Extension article about lavender. Good luck!