TreeofLife,
It seems a common practice in this lab. There are 5 more people who worked as PhD students here at some point but didn't get a PhD by the end of their contracts. Need to notice, that PhD contracts here are for 3 years, with a sometimes possible extension for 6 months.
In my case there was one project progress evaluation meeting, where the Prof. showed to the commission that gave this research grant some results related to the performance of the developed instrument. After the meeting, he only told me that the whole project won't be extended after the end of the current period, but that anyway wasn't an expectation before.
Talking to the head of the department (we don't have graduate schools in the University structure) can help to make the situation more determined. Nice idea, thanks.