Light Observation Helicopter (LOH)
In October 1959 the US Army initiated three studies to determine Army aircraft future objectives in light observation, manned surveillance and tactical transport aircraft. The studies were used to develop plans to establish guidance for Army Aviation in the 1960-1970 tirreframe. One requirement which surfaced was the need to develop an aircraft to replace the OH-13 and OH-23 observation helicopters and the O-1A light fixed wing airplane. The OH-13 and OH-23 saw service during Korea and Vietnam. The 0-1 was a tandem seated observation alrnlane used in Korea and as a primary treiner.
Requirements identified in the studies were presented to industry in December 1959. Industry submitted 45 light observation aircraft designs to include ducted fan, tilt wing, auto gyro, fixed wing and helicopter concepts. The designs were evaluated in February 1960 by the Aircraft Requirements Review Board. The Board was aprointed by then General Lyman L. Lemnitzer, Chief of Staff of the Army. General Lemnitzer appointcd thc thcn TT Gcncral Gordon B. Rogers, Deputy COG, Continental Army Command as Chairman. The Board was composed of 10 General Officers and evaluated all industry designs. The Board recommended the Army's aircraft observation misslon could best be performed by pure helicopter. It also recommended that more than one aircraft be prototyped prior to selection of design for production.
In 1948 Army Aviation consisted of 2-place commercial aircreft of the Piper Cub type with similar numbers of dedicated crew. Logistics support came from the Air Force, Navy and commercial sources. The Korean war demands expanded the Army's air mobility requirement. Prior to 6 Novemcer 1956 the Army was required to utilize the service of the Air Force for the engineering and procurement of Army air items. On this date, a memorandum of aagreement (MOA) was approved by the Assistant Secretary of Defense (Supply and Logistics) to provide the Army direct access to the Navy for the procurement of OH-13 and OH-23's for which the Navy initially had responsibility. The Army could then forward its Military Interdepartental Purchase Request (MIPR) and have direct communications with the procuring service.
By 1960 the Army increased its logistic role by determining qualitative and quantitative requirements for their aircraft to include support, programming, budgeting, and fuinding for procurement, maintenanoe and supply through depot level and approving changes during production and retrofit. For example, in 1959, the Army contracted directly for industry overhaul, parts, technical representatives, training, basic and applied reserrch.
Five additional Army study groups convened between 1960 and 1966 reaffirmed the need for a light observation helicopter (LOH). In addition, commanders from Vietnam expressed a need for the LOH. A major disadvantage of using the OH-13 in Vietnam was the requirement for aviation fuel (JP-4). The UH-1 (Iroquois) and CH-47 (Chinook) were usinL a different fuel, (jp-4). Other requirements were for an aircraft with greater range which could scout and maneuver with greter speed to make it a more potent weapon system.
On 13 May 1960 the Army prepared military characteristics for the LOH. The characteristics stipulated the LOH should be an advanced design turbine powered helicopter with improved performance, smaller, lighter in weight, easier to maintain and more reliable than the OH-13 and OH-23. Detailed technical specifications were developed and on 14 October 1960 the Navy issued a Request for Proposals (RFP) to industry. Twelve manufacturers responded, submittinE 17 designs. The techical evaluatlon was performed by the Navy supplemented by Army experts in April 1961. The operational evaluation was accomplished by the Army Aviation Test Board at Fort Rucker, Alabama.
The Board recommended that two designs, Bell Helicopter's OH-4A and the Hiller Aircraft Corporation's OH-5A, be selected for prototype testing. A design submitted by the Hughes Tool Company was set aside as beyond the engineering capabilities known. Several Board members, then Brigadier General Clifton F. Von Kann, Director of Army Aviation and LT General Barksdale Hamlett, believed the Hughes design should be pursued. The Army staff agreed that the Hughes design offered an opportunity for a technological break-through and recommended that, in addition to obtaining the prototypes, the Army develop and test the Hughes design as a separate action.
The US Army Test and Evaluation Command conducted an extensive test program on each type of aircraft. The test program included logistical evaluation, aerodynamic testing. The information accummulated on the three competing models was analyzed beginning in September 1964. An Army evaluation group (now Source Selection Evaluation Board) headed by then Brigadier General Kenneth Bayer met for three weeks to evaluate in three areas; technical, operational suitability and economics. The Board was composed of 130 people specially selected for their experience, technical skill and maturity of Judgment.
All three LOH designs met most of the requirements. However, none fully met all of the Army's requirements. The operational suitability team made comparisons between the OH-13, 0H-23 and the LOH's. These comparisons indicated all three new designs were a substantial improvement over the current aircraft. The cost effectiveness study determined that no clear choice could be made between the Hiller OH-5A and Huhes OH-6A. The OH-5A had lower maintenance requirements but were offset by better performance achieved by the OH-6A. The Bell OH-4A was the highest cost design and had reduced mission capability due to its greater weight.
A second Design Selection Board, now Source Selection Advisory Council, was formed in October 1964. The Board considered all findings and conclusions of the Army evaluation group. It unanimously concluded that the Bell aircraft's performance deficiencies and high cost eliminated it from further competition. It also concluded that either the Hiller OH-5A or Hughes OH-6A should be selected by competitive procurement utilizing a multi-year contract for at leost 1,O0O aircraft to be delivered over a three-year oeriod.
The Secretary of the Army, Mr. Stephen Ailes, decided to procure the LOH by a two-step formal advertising procedure and set the quantity at 714 aircraft, the approved total quantity in the Five Year Force Structure and Financial Plan for fiscal yeors 65, 66, and 67. Secretary of the Army ordered the procurement and a two-step invitation for bid was released to Hiller and Hughes in accordance with the Armed Services Procurement Regulations (ASPR). On 1 May 1965, both Hiller and Hughes were asked to bid on a total of 714 aircraft; 88 in FY-65, 168 in FY-66 and 458 in FY-67 with a 50 percent option per year for 357 additional aircraft at the same unit price. The bids were opened publicly on 21 May 1965.
Airframe Total Unit Contract Cost Price Hiller $29,415 $22,250,134 Hughes $19,860 $14,968,663
The Hiller OH-5A cost per pound was $21.61. The Hughes price was $22.20 per pound. Hughes was asked to verify its price. The Army received confirmation on 24 May 1965. A contract was awarded to Hughes on 26 May. The total estimated fly-away cost of the fully equipped aircraft was estimated then at $75,146. It was later determined the use of the multi-year buy technique in the procurement of the OH-6A resulted In a unit savings of $16,531.
In September 1965 an urgent requirement arose for additional OH-6As to be developed for use in Vietnam. A supplemental FY-66 budget request was submitted to Congress to provide funds to purchase 121 OH-6A's over and above the original contract and to exercise the FY-65 option for 44 helicopters. The budget was appropriated and on 09 December 1965 a teletype RFP was sent to Hughes for the adz tloal helicopters to be delivered by 30 June 1967. The RFF was formalized on 17 January 1966 by a definitized RFP. The Army exercised the option for 44 helicopters and negotiations were opened for the 121 aircraft. Hughes set their initial target price at $55,927 and negotiations terminated on 10 May 1966.
Upon completion of the contract the Army had 1,071 OH-6A helicopters placed on contract for $19,860 per unit airframe. The first deliveries began on 02 September 1966, approximately two months behind schedule.
The Army accepted a bid from Hughes for approximately 1,000 units at a price which the Army had every reason to believe would result in a loss to the company of at least $10,000 per aircraft. Hughes made projections of what they thought their profits could be from the commercial version of the LOH. They felt they could produce about a ten million dollar profit during the 0H-6A buy and they could gamble that amount. Hughes denied that the loss would be recovered in prices of follow-on Army contracts. Hughes rationalized they then had $l0,000 to play with and wanted to drop the OH-6A offer just below $20,000 (a round figure) to $19,860. The Army estimates ranged from $28,204 to over 440,00o per aircraft. The essence of the alleged buy-in was highlighted when the Army requested the expedited buy of an additional 121 LOH's for Vietnam. The civilian price turned out, initially, to be about $55,000.
Follow-on contracts were obtained by competing the LOH again via two-step formal advertising. The three firms, Bell, Hiller and Hughes responded with an intent to bid. Hiller withdrew and Bell submitted the low bid and was awarded a five-year, multi-year firm fixed price with escalation contract for 220O OH-58A helicopters.
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