Lawsuit over Army's use of AI in contract award could increase transparency in procurement

TRAX International Corporation has filed a lawsuit in the U.S. Court of Federal Claims, alleging that the Army's evaluation of a $450 million contract was distorted by artificial intelligence hallucinations. The lawsuit follows a denied Government Accountability Office protest. Because there are no specific federal rules governing AI use in procurement, legal experts suggest this case could establish new standards for how agencies document, validate, and disclose their use of AI algorithms.

TRAX lawsuit against Army contract

• ▪TRAX International Corporation filed a lawsuit in the U.S. Court of Federal Claims asking the Army to reevaluate proposals for a $450 million White Sands Missile Range mission support services contract.
• ▪The Government Accountability Office acknowledged the Army erroneously assigned TRAX International Corporation a weakness but ruled it was a harmless error that did not prejudice the award.
• ▪The Government Accountability Office denied a bid protest by TRAX International Corporation challenging the Army's contract award to Southwest Range Services.

AI hallucinations in evaluations

• ▪TRAX International Corporation stated that the Army's Source Selection Authority adopted strengths and weaknesses from the Source Selection Evaluation Board report without explaining if they were generated by artificial intelligence.
• ▪The Army stated that the Source Selection Authority did not use artificial intelligence to evaluate proposals, but TRAX International Corporation stated the Army refused to clarify if the evaluation board used it.
• ▪TRAX International Corporation's lawsuit alleges that the Army's technical evaluation was distorted by artificial intelligence hallucinations that weakened TRAX's bid with made-up references to its proposal.

Federal AI procurement rules

• ▪Existing procurement rules establish who has authority to make decisions but do not address the extent to which artificial intelligence can be used in evaluations.
• ▪There is currently no specific federal acquisition rule governing how federal agencies can use artificial intelligence during bid evaluations.

Agency AI transparency requirements

• ▪Ira Rushing of Tully Rinckey stated that federal agencies must document that a human meaningfully reviewed and stood behind any artificial intelligence-produced procurement evaluations to avoid looking arbitrary.
• ▪Alan Chvotkin of Protorae Law stated that contractors are likely to begin pressing federal agencies to disclose upfront in solicitations whether and how artificial intelligence will be used.

Discovery process for AI use

• ▪Ira Rushing of Tully Rinckey stated that if TRAX International Corporation's lawsuit survives a motion to dismiss, the discovery process could force the government to turn over information regarding its artificial intelligence use.
• ▪Alan Chvotkin of Protorae Law stated that the Army will likely argue that any evaluation errors did not change the contract outcome, but the administrative record could reveal how artificial intelligence was used.

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