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Main problem with any scheme that involves a "limited budget" is how to set a reasonably level playing field. I mean a bloke with £100k of machine tools and other kit in his home workshop and plenty of connections in the engineering trade could probably make quite a large and complex machine for £1000. He only really needs to buy materials. An enthusiastic amateur with a few tools in his garage, a bit of mechanical skill, and buying components from shops and catalogues can't possibly compete.
My only suggestion would be that the finished item had to be made from a specific list of priced materials and that draughting, cnc programming, machining, prototyping, assembly, testing, etc. etc. were all provided free. Then it would only be limited by the designers knowledge and imagination. Hard to set up though.
They have the same problem trying to limit budgets in F1. If you come up with a workable solution then I'm sure everyone would be interested :-))
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