Not meant in a snarky way, but that almost feels to me as if the process worked. If they application committee did not see the value in the proposed work, it indicates they probably don't have much need for it. If they don't have much need, they shouldn't fund it.
That's not to say the proposal isn't worthwhile, just that it didn't find the right audience. A contractor may have a whiz-bang new method of snow removal, but it doesn't mean people in Phoenix will want it (or even understand it).
This problem goes even deeper, because it not only applies to papers but also to research grant applications. I even had once got a (positive) recommendation for one of my applications, but I could see from the statement that the reviewer did not really understand what was important.