The point is that if your bid costs are being met by the Government then it gives you the opportunity to stay in the competition at no cost to you and to submit a final bid priced at a level where you feel that you can meet the contract and still make a worthwhile profit. So if there are unreasonable penalty clauses, you just price these back to the customer (UK Government). It becomes your commercial risk as to where you draw that line.
It is also worth remembering (from open source) that over 50% of the evaluation of SAR-H bids will be against the technical solution and not the price. In other words this contract is not guaranteed to go to 'cheapest compliant bidder'. There is scope to reward innovation and capability beyond the basic requirement.
Speculation: Bids of this size need to be underwritten by invest banks. I think I read something the other week about a bit of a hiccup in the banking world recently? Could there be reasons other than the ones quoted for UK Air Rescue to have pulled their bid?