you bid on it so someone else can't get it before you do. you then hope that there's going to be a way to make it work, but in the end, you realize it's just not going to happen. so now, you just take the fine and walk away

Exactly my thoughts as well— why did they bid in the first place?

Because the team drafting the grant application isn't the same team that's evaluating the feasibility of doing the work.

Honestly - if it's anything at all like some of the companies I've peripherally worked for around government grants, the team seeking grants doesn't actually give a flying fuck if they can do the work. Their job is to secure as much grant funding as possible, any way possible.

Implementation planning only happens after securing the grant. At that point it's far too late.

Also, you may know there are certain areas required by the bid that are less desirable. As long as there is enough desirable in the there to make up whatever punative fines will be levied for failing on the other areas, then it's still a win for the company