Prizes yield results. Not the X33 kind, either, but actual results. If they don't, the prize isn't collected and taxpayers don't foot the bill. If the prizes DO yield results, though, then somehow I doubt the uproar would be as great for "overpayment" to the efficient, as the uproar regarding X33. Frankly that uproar wasn't big enough, especially given the scandals involved:

http://www.spaceprojects.com/x33

Anyhow, nothing says that prizes can't be slightly smaller than what might be needed, provided that market incentives can be tacked on, too. Colin Pillinger (of Beagle 2 infamy) didn't have tax incentives or the possibility of getting private property rights on Mars claimed for himself. If matters had been different, he might have been able to raise more $$$....especially if he had had a prize to incentivize him as well.