On 14 October 1960, the United States Navy solicited responses from 25 aircraft manufacturers to a request for proposals (RFP) on behalf of the Army for the Light Observation Helicopter (LOH). Bell entered the competition along with 12 other manufacturers, including Hiller Aircraft and Hughes Tool Co., Aircraft Division. In January 1961, Bell submitted Design 250 (D-250), which would eventually be designated as the YHO-4. On 19 May 1961, Bell and Hiller were announced as winners of the design competition.[note 1]
Bell produced five prototypes of the D-250, as Model 206, in 1962, the first prototype making its maiden flight on 8 December 1962. That same year, all aircraft began to be designated according to the new Joint Services designation system, so the prototype aircraft were redesignated YOH-4A. The YOH-4A also became known as the Ugly Duckling in comparison to the other contending aircraft. Following a flyoff of the Bell, Hughes and Fairchild-Hiller prototypes, the Hughes OH-6 was selected in May 1965.
After the failed military contract bid, Bell attempted to market the Model 206, but it did not fare well at all commercially. Bell's market research showed that customers found the body design mostly unpalatable. Bell would eventually redesign the body of the airframe to a more sleek and aesthetic design and reintroduced it as the Bell 206A JetRanger.
^The Navy, which was assisting the Army in the selection phase, recommended the Hiller Model 1100, while the Army team preferred the Bell D-250, and then the 1100. The Selection Board accepted both aircraft for an evaluation test. Afterwards, the acting Army Chief of Staff directed the Selection Board to include the Hughes 369 in the fly-off competition.