A charity doing a contest often fares no better than a for-profit corporation. Cf. my comment about pro bono above.
Grants and proposals are not in any way comparable to a contest/spec work. Those who submit proposals don’t happen to be doing all of the science/whatever which requires the grant. If they could do that, they don’t need a grant in the first place.
If grants are required for equipment, facilities, or travel, faculty aren’t going to pay for all of that out of their own pockets first (assuming they even could). A proposal is a document which covers the potential to the funding agency so that work can be started or continued.
(I submit proposals as a part of my work. While they can be sometimes an investment of time—and are tightly controlled and templated for that reason—they never contain a complete or even the beginnings of a project.)
