The rules are new for this year's competition, according to The Next Web. The rules are stated clearly in Apple's FAQ, "Apps must be available on the App Store by May 23, 2011, to be considered for an Apple Design Award."
While I don't consider third-party developers marketing their wares in Apple's App Store a negative, TNW thinks differently. "While it’s not difficult to convince app developers to make their software available on a new distribution platform, with increased visibility and sales a given, this move sends a clear message that Apple only intends to support and promote developers who participate in the App Store," it writes.
I still don't see the negative. There are few places to hawk a legitimate application, and Apple's App Store process is a rigorous one. If a developer can get their application past the Apple board, then it's probably good to go for Android. In fact, part of the award should be a highlighted app in the App Store.