UCI has lots of rules around the size, geometry, and weight of equipment that can limit how much better you can make a bike. They even explicitly don't allow new innovations without their prior approval. Manufacturers find ways around the rules but to a large degree better bikes are actually not OK.
@mathgladiator sometimes such rules are aimed at limiting the advantage you can buy with money. Not sure if this is the true motivation here. Or in Formula 1, the restrictions are generally for the safety of the drivers. Anyway, engineering within constraints can still be competitive.
(I don't feel strongly about this personally, just listing some of the counterpoints)
This is similar to the limit imposed on various motorsports. It's not that engineers aren't allowed to compete (they most definitely do, within the limitations imposed by the sport's governing body)--the rules exist to level the playing the field a bit between teams and companies with radically different budgets.
My favorite example of forbidden ingenuity is the "sucker car" (Chapparal 2J) which used a plastic skirt to seal the car to the ground, and pump that sucked the air from underneath the car, producing an insane amount of downforce. It was outlawed of course after blowing away the competition.
There is a legitimate safety concern with active aero systems. If they fail in the middle of turn the car is likely to slide off the track, endangering everyone on the track.
I also liked the Mazda Rotary/Wankel engine that really threw the classification systems at LeMans.
Because the Rotary engines are something in between a 2-stroke and 4-stroke calculating it's displacement in comparison to 4-stroke engines was difficult.
In case of Formula 1 racing rules exists to force more innovation.
For example, the trend of the past few years is to limit engine capacity and reduce fuel consumption. So the rules say your engine must go down from 3 liters to 2.4 liters capacity and now it's your job as an engineer to maintain the same horsepower (of roughly 800 hp) at that lower capacity.
Actually, changing those rules every year puts teams with lower budget at disadvantage: they are basically limited to buying engines from richer teams, because they wouldn't be able to keep up with all those rule changes on their own.
UCI has lots of rules around the size, geometry, and weight of equipment that can limit how much better you can make a bike. They even explicitly don't allow new innovations without their prior approval. Manufacturers find ways around the rules but to a large degree better bikes are actually not OK.