I think the Korean government did have a competition like this, I remember last year we got a bunch of models released at the same time to make the cut for the next stage. The models weren't anything to write home about, IMO.

Having it with clear hw requirements tiers is a nice differentiator. The only issue is that the benchmarks would 100% need to be closed, no other way around it. And then you have the issue of creating and curating good evals for every "stage" of the project. That's a hard task even for "honest" lab-internal evals. And you'd have to publish those evals after each round (for trust purposes), and start over for the next round. Doable, but it would cost a lot (probably more than the prize pools) and you'd have to keep doing this.