Well, since there's just been a contest run on BL, it probably makes sense to make this one a lemon contest, although I'm not totally certain about that yet (it depends on what everyone else has to say about it).
The biggest questions I can see are how we're going to judge the contest and what (if any) prizes we're going to offer. The better option for the contest is probably to have judges, because they will give the author honest criticism and an indication of the issues with their story, but that requires finding people who are suitable to judge. Worse, it's difficult (although not impossible if you do a bit of maths, which I am capable of) to allow the judges to also enter the contest and, given the number of members the site currently has (and the fact that I do not think I would be a good judge), that will seriously limit the possible entrant count. Plus, several of the most obvious choices of judge are likely to also want to enter (Elf in particular). I will see if I can think up a good way to fairly allow the judges to enter the contest (obviously they won't judge their own work), otherwise I'm not sure how best to handle it.
As for prizes, ideally we'd have some, but I have nothing to offer and no money to buy anything with, so I'm not sure what exactly we can do in that respect.