You also need to consider, selection for all DCO designators is extremely competitive. For years it was sub 10% selection rates, that is more competitive than some Ivy League schools. With such a large pool of candidates (relatively speaking) the board can be very selective when making their decision.
However, all is not lost! You can apply again, but you're right, you need to show some level of improvement the second time. There are opportunities to volunteer, get additional education/certification and I say even seek out people via LinkedIn who are reserve SUPPOs (CDR or CAPT) and start networking. Lastly, sometimes the board thought you were competitive, but just didn't make the cut this time and want to see you, or any applicant, apply again. That last sentence was told to me by my recruiter just before I was selected on my second time around.