Failure to meet the one-in-twenty requirement contained in the rotor burst Advisory Circular doesn't mean it's not compliant. An AC outlines an acceptable method of compliance, but not the only allowable method of compliance. The regulation requires the risk due to rotor burst be minimized - the AC helps quantify how to do that - but there is a proviso about taking 'reasonable' steps to minimize the risk when the risk is already small. Boeing argued that replacing the existing (very reliable) rudder system was not 'reasonable' (and those with a good memory might recall why Boeing might not be keen on rushing to design a new rudder control - United 585 and USAir 427). The FAA agreed - that makes the design complaint by definition.
You can argue if it was appropriate for the FAA manager to overrule the specialists, but not if it's compliant.