If the two years of working experience has equipped the engineer with skills that are needed for the job and a similarly experienced engineer with first class and no relevant skills apply for the same job, of course you will have a chance. When I was job hunting, one thing i learnt was that grades were important in the eyes of all companies when hiring an engineer, especially in engineering. It is not just a public sector thing. There is a reason for that. However, if you have something other than your grades to show(if impressive), I do not think the rules apply.

I am not from DSTA, nor have I applied there. However, my company has a reputation for not hiring below second upper as well. Senior management has stressed their worry about that misconception of such a "cut off point" as they fear that skillful and experienced engineers would not apply.