Hi, Gary
You might want to check out the IPMS contest rules at www.ipmsusa.org. While there are a lot of folks who don't really like the organization, they are the ones that have--so to speak--set the standard for contest judging. At the IPMS Nationals in 2002, part of kit registration and entry involved supplying the instructions and including them with your entry form if you designated the kit as OOB. To answer your question, if the instructions show applying the PE set that came with the kit, then it's considered OOB.
There are organizations that have no ties with IPMS. The one that immediately comes to mind for me is the Armor Modeling and Preservation Society (AMPS). Their judging criteria is quite varied from the IPMS standards, but as I understand their criteria, OOB doesn't carry a lot of weight with them. Judging is peer-based, and depends more on the work you did than the small seam or glue smear that may mar an otherwise "perfect" entry. The more work you do (scratchbuilding, PE sets, resin converstions, etc.) the higher the potential award (gold, silver, bronze) and advancement from "novice" through "master". Funny, though, just like IPMS, they have their rules problems, as well.
Hope this helps,
Gip Winecoff