It wasn't just Prodrive though. There were a number of big names who applied who weren't picked, like Lola.
To me at least, it appeared the FIA chose teams they could 'use'. It was a time when they were trying to force through a single engine supplier, and top teams were talking of a breakaway. They chose weak teams who would likely be on the FIAs side in a conflict, and only selected teams who were going to use the Cosworth engine, one of the suppliers in talks about a single engine.
However, when the breakaway idea cooled down, the single engine idea was canned, and a bunch of testing restrictions came in, the FIA were stuck with 3 news teams that were of little use to them, and have struggled to hold on to their places at the bottom of the grid.
If the FIA had not gone with the political choices and instead looked at proven successfull race teams then we could have had 3 far more solid and successful teams on the grid now.