Yay, Iron Terrain Builder!
I would run an ITP comp similar to the Terragenesis comps. (LINK) Their rules give a broad theme (similar to IP) that can be interpreted many different ways, and that generally is the only requirement. Sometimes the themes do have certain criteria such as "must fit on a CD" or "must be at least twice as tall as it is wide," but they still remain pretty open-ended. (again. like IP) Also, the terrain can usually be from any genre, although a "Malifaux-themed" comp could potentially be fun.
Each round should last for maybe two weeks, which should give the contestants enough time to do a decent sized piece while still limiting the size somewhat.
Pre-cast pieces would probably be OK to use, but only if a majority of the terrain piece is scratch-built. (i.e. I would allow someone to use, say, pre-cast windows, but not an entire resin building - unless it was significantly modified, that is.)
For judging, I would do it almost identically to IP, with categories of something like originality, theme, and craftsmanship.