IIRC the army found that the BCGs submitted during phase 1 of the PiP did not offer enough improvement over the existing design, so they went with the existing design on BCGs. The reasons Colt got the contract are numerous, and political reasons likely played a large part. Colt has been a staple of the MIC for a long time, and giving FNH the contract for M4A1s was a big blow. DOD was throwing Colt a bone as much as anything to keep the company from folding. There is some strategic benefit to keeping an arms company that has proven production quality and capacity open, and without contracts I don't think Colt would stand on its own 2 feet. KAC would likely have never moved into the civilian market if there wasn't a looming draw down in Military spending after pulling the majority of the forces out of the middle east, and Colt's business moves toward the civilian market have been to mark the sporters with M4, and license other companies to make a couple 3 gun rifles. They need moar contracts.
Not to mention this keeps the number of companies with the TDP limited, and Colt has the production capacity specific to the TDP already in place. I like Colt, but they didn't get the PiP contract because they make superior BCGs, but because all the improved designs that were submitted weren't as substantial of an improvement as those companies would have you believe.