I think part of the problem with S@W achieving a large US order for pistols was also in part to their initial experience with the US Americans. There are numerous examples of officers writing back to complain about service issues with the US Americans in Farrington's "Arming & Equipping the United States Cavalry, 1865-1902"

Issues ranging from the pistols not keeping time and many extractor issues which could not be addressed in the field. I know the Schofield is a different pistol but I believe the American experience may have left a bad taste as far as the Army was concerned. They also may have been worried about S@W's production capabilities as they were so heavily contracted to Russia.