Merits review means that a person reviewing the original decision will look at all the evidence and information that was before the original decision maker and decide whether or not they came to the right conclusion (i.e. whether the decision was correct 'on the merits').
Whether or not XYZ are able to stop you contacting people will mainly depend on the sub-contract you previously held with XYZ. The sub-contract may contain a clause which prevents you from using or disclosing information (including contact details) that you obtained during the course of carrying out the sub-contract other than for the purposes of the ABC project. A restraint of trade clause (including in the form of a confidentiality clause) can be included in a contract as long as it is reasonable.