First off, they might want to Re-Frame their definition of failure, and then determine if they crossed any of the lines that perhaps contributed TO failure in today’s society.
So, now for a reframe. Did they have any part in the vendor NOT being willing to sign the security agreement? One would certainly hope not. But what ABOUT all their effort. Well what else have they LEARNED while they have performed the required tasks on this project? Did they acquire skills that they can now carry to other areas of their job, develop ideas that can help pave the way for some other project? Maybe even learned enough that now they are interested in achieving more on another project? Sounds like a win to me!