In the software industry, we flatly ignore and delete all unsolicited submissions. Opening a solicitation opens you to a lawsuit should you, or your company, have a similar idea. If you state, without exception, that you will not accept ANY submission - then if you happen to use a similar idea, you have a much better leg to stand on in the whole "coincidence" line of defense.
This isn't what you asked in your post though. How do you tell someone it's crap? Well... You tell them. "This isn't publishable material." There are easier ways, of course. "We've decided to go another way," is always good, especially if it's true. Being honest is, generally, a good idea. Avoid questions such as, "Why?". That might lead you into telling him, "It's crap." If you can find NOTHING about the work that is worth using, then you will be doing him a service by saying, "It's crap." Otherwise, focus on what is good, and tell him how to improve what is bad.