AI Hallucinations Tainted Army’s Missile Test Award, Suit Says - Bloomberg Law News

The US Army improperly relied on an artificial intelligence tool to review bids before awarding Southwest Range Services LLC a $449 million US Army contract for mission services at New Mexicoâs White Sands Missile Range, a rival bidder says.

The US Court of Federal Claims should force the Army to make a new award decision because hallucinations from the Armyâs AI tool erroneously created a false appearance that Southwest Rangeâs bid was technically superior and Trax International Corp.'s was weaker, the company said in a complaint made pubic Tuesday.

Southwest Range is a joint venture between Systems Application & Technologies Inc.,

Trax, which submitted a $420 million bid, filed an unsuccessful protest at the Government Accountability Office. It then filed its court complaint under seal in May.

The record before the GAO doesnât explain whether Southwest Rangeâs technical strengths came from a member of the Armyâs source election evaluation board, or the Armyâs AI tool, Trax says. The court âdefers to agency judgments and discretion, not algorithms,â the complaint says.

Trax also says the Army conceded that it assigned its bid a weakness that the record didnât support, but the Army didnât explain how the error occurred. The weakness seems to be a âclassic AI hallucination, with made-up referencesâ to Traxâs bid that Army evaluators didnât check, the complaint says.

This improperly assigned weakness calls into question other evaluation findings the record similarly canât support, Trax says.

The complaint further alleges that Southwest Range is ineligible for the contract because it lacks an adequate accounting system, and that the Army erred in concluding that Southwest wouldnât have an organizational conflict of interest if it won the award.

The Justice Department didnât immediately respond to a request for comment. Counsel for Southwest Range declined to comment.

McDermott Will & Schulte LLP represented Trax. Arnold & Porter Kaye Scholer LLP represent Southwest Range.

The case is TRAX Intâl Corp. v. United States, Fed. Cl., No. 26-cv-896, complaint 7/28/26.

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