Development
In 1960, the United States Army issued Technical Specification 153 for a Light Observation Helicopter (LOH) capable of fulfilling various roles: personnel transport, escort and attack missions, casualty evacuation and observation. Twelve companies took part in the competition and Hughes Tool Company's Aircraft Division submitted the Model 369. Two designs, those submitted by Fairchild-Hiller and Bell, were selected as finalists by the Army-Navy design competition board, but the U.S. Army later included the helicopter from Hughes as well.
The first Model 369 prototype flew on 27 February 1963. Originally designated as the YHO-6A according to the Army's designation system, the aircraft was redesignated as the YOH-6A in 1962 when the Department of Defense created a Joint designation system for all aircraft. Five prototypes were built, fitted with a 252 shp (188 kW) Allison T63-A-5A, and delivered to the U.S. Army at Fort Rucker, Alabama to compete against the other 10 prototype aircraft submitted by Bell and Fairchild-Hiller. During the course of the competition, the Bell submission, the YOH-4, was eliminated as being underpowered (it used the 250 shp (190 kW) T63-A-5). The bidding for the LOH contract came down to Fairchild-Hiller and Hughes. Hughes won the bid, and the Army awarded a contract for production in May 1965, with an initial order for 714 that was later increased to 1,300 with an option on another 114. Hughes's price was $19,700 per airframe, less engine, while Hiller's price was $27,000 per airframe, less engine. It should be noted that the Hiller design had a boosted control system, while the Hughes design did not. This would account for some of the price difference. Hughes is reported to have told Jack Real that he lost over $100 million in building 1,370 airframes. It is reported that Hughes had directed his company to submit a bid at a price below the actual production cost of the helicopter in order to secure this order, resulting in substantial losses on the US Army deal, with the anticipation that an extended production cycle would eventually prove financially viable.
In 1968 Hughes submitted a bid to build a further 2,700 airframes. Stanley Hiller complained to the U.S. Army that Hughes had used unethical procedures; therefore, the Army opened the contract for rebidding by all parties. Hiller did not participate in the rebidding, but Bell did, with their redesigned Model 206. After a competitive fly-off, the Army asked for sealed bids. Hughes bid $56,550 per airframe, while Bell bid $54,200. Reportedly, Hughes had consulted at the last moment with his confidant Jack Real, who recommended a bid of $53,550. Hughes, without telling him, added $3,000 to the bid and thus lost the contract.
Read more about this topic: Hughes OH-6 Cayuse
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