If SNC loses in down select due to failure of a non-flight component then I'll lose all respect for the selectors and the selection process. Recent history has shown both to be thoughtful and rational.
I think it would have more to do with how much of a setback this represents to SNC's timeline. SNC had a bad day. They'll make it up or they won't. If they do it shouldn't matter. If they don't and they're not ready when the clock chimes, that does not necessarily reflect badly on the selection process.
Agreed. In addition, the winged lifting body is a more ambitious project than a capsule, so they had more engineering work to tackle than SpaceX or Boeing. And they probably started a little behind SpaceX and Boeing; SpaceX had built Dragon and has been flying and recovering it, and Boeing had fairly extensive experience with capsules and capsule designs they could re-use. And, to my perception, they have expended less money per unit time than SpaceX or Boeing, when the above two factors would require more money spent faster to stay even or catch up.
Still, the clock hasn't yet chimed. We'll see what measures are needed to recover.
P.S. You could make a drinking game on how many times the shuttle is mentioned on any article about DreamChaser, or any quote from SNC about DC. The references get a bit thick sometimes. Those references are a good excuse to stop talking about DC and wax nostalgic about the good old shuttle, but really the focus needs to stay on Dream Chaser, what it has actually accomplished and how far it still needs to go.