That wasn't a viable option for Westinghouse (Who controlled Baldwin at the time). While the Lima locomotives were likely much better built, the largest prime mover that Hamilton had at the time that was suitable for locomotives was 1200 Horsepower. There was nothing Lima-Hamilton had available that could replace the 1600 HP supercharged 608 that Baldwin used in the AS-16/416/616 series as well as the RF16s.
Westinghouse wanted to bring Lima into its control to get the "free piston" gas generator technology that Lima was trying to adapt for locomotive use. While free piston engines can make fine compressors (the Germans used them in U-boats in the 2nd World War) they did not translate well to the highly variable loadings that locomotives require. Lima played thier hand very close to the chest and made Westinghouse take over Lima before they allowed Westinghouse to learn how poorly the development program was progressing.
This is covered in Kirkland's fine books "Dawn of the Diesel Age" and "The Diesel Builders"