Dammit I was away and missed some good points here....
You don't give away your IP just by submitting a bid! It's only for finalists...now that finalists isn't defined (or is it...didn't read the rules) then that's a whole different issue.
The students know what the deal is, if they feel that their work is being sold off with no reward, then don't bid/put in a design...it's a bidding process whether it's called a tender, or a contest as this one is.
As far as I know this is the way that even advertising companies go for work. They submit a tender, utilize a LOT of their own resources, and hope their design is the winning one.
I love the comments in the article that the government SHOULD put the students in touch with design firms and work on designs...wouldn't that change the entire nature of the contest into a full blown bidding process for work? Then people would ***** and complain that the students that weren't selected for roles in companies are unfairly kept away from submitting their design....you can't win either way...someone will complain about something.
A sole contractor, like I see these students being in this case, has the exact same method. Design, submit, and either get the price, or not.