Trax alleges Army AI hallucinations skewed $450M award
The Army conceded an evaluation error that reads like a classic AI hallucination; proving AI misuse is nearly impossible when agencies don't disclose they're using it.
TL;DR
Trax International Corporation sued the Army in the U.S. Court of Federal Claims, alleging AI hallucinations produced a false weakness in its bid for a $450 million mission-support contract at White Sands Missile Range, and that no one on the evaluation board checked the output. The Army has conceded the error isn't supported by the record. The suit follows a similar protest by Salient CRGT earlier this year over undisclosed AI use in a Defense Department bid evaluation. The pattern exposes a structural gap: OMB rules require agencies to disclose high-impact AI use, but few civilian agencies are reporting procurement AI as high-impact, leaving contractors unable to prove misuse.
Trax International Corporation filed suit in the U.S. Court of Federal Claims in late July, asking the court to direct the Army to reevaluate bids for mission support services at White Sands Missile Range. The $450 million contract went to Southwest Range Services with a $29.4 million price premium over Trax's bid. The complaint centers on an evaluation weakness the Army has already conceded is unsupported by the record, an error Trax argues bears the signature of a "classic AI hallucination, with made-up references to TRAX's proposal, that no one on the Source Selection Evaluation Board checked."
The Government Accountability Office denied Trax's bid protest in May, but the company claims the administrative record provided to GAO didn't disclose whether the strengths assigned to the winning bid came from a human evaluator or an AI tool. That distinction matters: Trax argues that removal of the conceded weakness could have changed the award decision given the $29.4 million spread between bids.
A pattern without a remedy
Trax isn't the first to raise the issue. Salient CRGT alleged in 2025 that a Defense Department subagency improperly used AI rather than human evaluators to assess bids. GAO dismissed those allegations as abandoned in a January 2026 decision, which means no tribunal has yet ruled on the core question of whether AI-assisted evaluation without disclosure violates procurement law.
The disclosure gap
OMB rules require agencies to identify and publicly report high-impact AI uses, including those in procurement. But David Timm, a partner at Burr & Forman, flagged in a recent Washington Technology op-ed that few civilian agencies are reporting procurement AI as high-impact. "If agencies do not comply with the OMB rules it will complicate how contractors prove their allegations," Timm wrote.
The practical consequence: a contractor challenging an AI-tainted evaluation must first prove AI was used at all, and the agency holds all the records. The Army declined to comment on pending litigation.
What changes Monday
Not much, and that's the problem. Contractors facing debriefings on major awards should press for explicit disclosure of whether AI tools were used in evaluation and retain outside expertise to spot hallucination-pattern errors: fabricated references, strengths or weaknesses that don't correspond to proposal text, internally contradictory assessments. Until agencies treat procurement AI as the high-impact use it plainly is, contractors will be litigating blind.
Published ·Updated ·Deep Fathom