Point 1: SpaceX's entire development philosophy is "test early, test often and learn from failures". This is a much quicker pace than simulating every imaginable failure scenario and leads to faster progress in development. With the Falcon 9, that process proved wildly efficient and successful, culminating in a launch vehicle so reliable that it's cheaper to insure a payload on an F9 that already has multiple launches under its belt than a brand new booster. And they're turning enough of a profit to develop the Starship largely on internal funds, seeing how the early Raptor flight tests were before the HLS contract.
Point 2: Just adding, the Raptor engine is the first full-flow staged combustion engine to ever get off a testing stand and actually fly. The engineering complexity of these things is on the level of the Shuttle's RS-25.
Point 3: SpaceX were the only ones with more than designs and mockups to present, and they had a reliable track history from working with NASA on the commercial resupply and crew projects. And I see no problem with awarding a contract to a bid that actually fits into the budget.
Point 4: Multiple options was always part of the plan. NASA wants redundancy, so that if one of the providers runs into problems, the other provider can continue (and perhaps even take up the slack) instead of everything coming to a grinding halt. For a perfect example, look at the Shuttle and Commercial Crew programs. The Shuttle got grounded and since it was NASA's only manned launcher, they had to bum rides from the russians. In contrast, the CC contract was awarded to Boeing and SpaceX. With Starliner's continued issues, SpaceX has picked up the slack and fulfilled more than their initial contract in launches, instead of NASA having to bum rides from the russians again. The initial HLS contract was supposed to go to two providers, until the budget got cut. Blue's bid was always the favorite for the second pick.
The first time Starship was spoken of was in 2012, yes. The very first idealistic designs of it. The design that's actually being tested is from 2018. So 5 years to go from "Alright, this is what we're gonna do" to full stack flight testing. Roughly on pace with their previous rockets, the Falcon 1 and Falcon 9 took about 4 years.
Blue Origin had (and still has) no experience with human-rated capsules. Their proposed lander had to be assembled in lunar orbit or launched on another SLS. The Dynetics lander was over its own mass budget. It was literally too heavy to do the job it was being proposed for. Meanwhile, SpaceX proposed a derivative of what they were already working on. Blue and Dynetics had no practical development done on their landers, they would've relied on the HLS award to even get started on actual development.
SpaceX's bid was just under 3B. Blue Origin bid at a bit under 6B. Dynetics wanted 9B. This information is freely available online. SpaceX was also given the least in design development funding, with 135 million versus Blue's 579 million and Dynetics' 253 million. It's not terribly shocking that a company with a good track record and the lowest bid wins a contract.
They needed a lander contract. The entire Artemis project was already fucked when it comes to the timetable, but delaying the HLS contract would've made things even worse. And when the budget got cut, they negotiated with the one bidder who was deemed most likely to still get the job done with the lower budget, as opposed to the other two whose bids were wildly over what NASA could give them. SpaceX bid at 2.94 billion and the final award was 2.89 billion. Again, BO bid 6 billion and Dynetics bid 9 billion. Losing 50 million is an easier pill to swallow than getting half or a third of what you need.