Comparison of Friedman and Gates Competitive Bidding Models

Abstract

The Gates-Friedman controversy is reviewed. An example of the application of each probability assessment model is presented. Monte Carlo simulation procedures used to evaluate the effectiveness of both models when applied to a contractor's 3-yr bidding history are described. The following conclusions are made: (1)Friedman's model always gives a lower optimal bid and a smaller probability of winning at optimality than does Gates'; (2)on the average, Friedman's model results in slightly hgher long-range profits than does Gates' but it obtains almost twice as much work; and (3)on the average, the relative frequency of successful bids corresponds more closely to the probability of winning at optimality found by the Gates model than by the Friedman model.