To a slightly lesser degree, Sikorsky and LM management are suffering from the same delusions as EVTOL startup developers “This technology will be viable, if just given time for development, a huge infusion of cash, and one or two technical miracles”.
For the FLRAA program, LM management was betting that Bell would fail badly. This would have left the US Army with the option of either canceling the whole program (and continue buying Blackhawks), or selecting the least bad of two failures. If choosing the second option, selecting the cheapest of the two would have made good sense. Since this would leave the Army more money to buy more Blackhawks. This also explains the ridiculous low ball cost of the LM submission.
When Sikorsky teamed with Boeing on SB>1, the Sikorsky troops were told that Boeing examined Bell's proposed tilt rotor and decided it wasn't a good aircraft, Boeing didn't have technology inside the firm to meet FLRAA goals, and that left Sikorsky with the technology Boeing wanted to partner with. Of course, that line was a bunch of BS. Some years later, when V-280 first flew, there were some public congratulations on social media by various Sikorsky engineers. The SB>1 CE called an all-hands meeting and told staff not to give congratulations because Bell's success was a serious threat to Sikorsky. Defiant was badly behind schedule with lots of critical paths holding first flight far into the future.
So I don't know that Sikorsky's leadership really bet on Bell failing badly, but their schedule and flight successes were a shock.
Sikorsky has actually studied tilt rotors quite a bit, though mostly in the context of their variable diameter technology, but the VDTR bits aren't necessary. There must have been some critical meetings in the early 2000's where the future IRAD efforts of the company were aimed. The V-22 was still struggling towards initial operating capability and the 609 was entering flight testing. So tilt rotors were moving from a future threat to a present threat, but one with observable challenges even for the industry leader in the field. Instead of being a second tier OEM for tilt rotor technology, they reached to the XH-59A and decided to be the first tier OEM for a different approach to higher performance. All the problems of the XH-59A were known but only some got solved or improved sufficiently by todays technology (in the end). Would love to have been a fly on the wall during those discussions. The XH-59A had the same general level of technology as the XV-15 but only few a few hundred hours before being retired as opposed to the thousands of hours and decades of flight history of the XV-15. Given the same level of technology, the tilt rotor appears to be a more practical aircraft. Even if today's technology made an X-2 practical, did Sikorsky not imagine that the same level of technology applied to a tilt rotor would make it even more practical? Or did they imagine that Bell would use the 1980's technology of the V-22 and Defiant could leap past it?