NIST wouldn't get away with choosing an algorithm that has been shown to have vulnerabilities, which is the only thing it could do is come up with an algorithm

NIST wouldn't get away with choosing an algorithm that has been shown to have vulnerabilities, which is the only thing it could do is come up with an algorithm with a subtle unnoticed flaw. And that algorithm has to have performance at least as good as the other algorithms in the contest. But if it can come up with a competitive algorithm with a subtle unnoticed flaw, than that attack would work almost as well in a contest hosted by some other organization. They wouldn't be able to guarantee the win, but they would still have a good shot at it.