Court: Armed Services Board of Contract Appeals (ASBCA) |
Citation: ASBCA No. 64064 |
Outcome: Company admitted AI use in brief after show cause order; non-existent case cited; brief not struck but government contract claim dismissed on merits |
Issue: AI hallucination in government contract appeal brief — first reported ASBCA AI case
| Element | Detail |
|---|---|
| Appellant | Endure Industries, Inc. (small business, pro se before ASBCA) |
| Respondent | Defense Health Agency (DHA) / U.S. Government |
| Underlying Dispute | Cancellation of incentive agreement for sterilization packaging supplies; ~$750,000 claimed |
| AI Conduct | Non-existent court decision cited; other decisions did not support cited propositions; AI use admitted in response to show cause order |
| Outcome | Brief not struck; claim dismissed — incentive agreement not a contract; illusory promise doctrine |
| Judge | Administrative Judge Herzfeld, ASBCA |
Background: A Small Business Contractor, a Cancelled Incentive Agreement, and a Pro Se Appeal
Endure Industries, Inc., a small business, had entered into an incentive agreement with the Defense Health Agency to supply sterilization packaging materials. After DHA cancelled the agreement, Endure filed a claim for approximately $750,000, asserting breach of contract, breach of good faith and fair dealing, and seeking a declaratory judgment that the cancellation provision was unconscionable. After a parallel Court of Federal Claims action was voluntarily dismissed, Endure pursued its certified claim before the Armed Services Board of Contract Appeals.
Appearing without counsel before the ASBCA — an administrative tribunal that handles hundreds of government contract disputes per year — Endure filed a response brief that raised immediate red flags: it cited a court decision that does not exist, and cited other decisions that did not support the propositions attributed to them.
The AI Issue: Show Cause Order and Admission
The ASBCA issued a show cause order, threatening to strike Endure’s brief for the citation problems. In response, Endure acknowledged that it had used a generative artificial intelligence program to assist in drafting the brief — one of the most explicit admissions of AI use in any published government contract appeal record. The Board did not strike the brief but proceeded to decide the case on the merits.
This case is notable as the first documented AI hallucination case before the ASBCA — the principal U.S. tribunal for government contract disputes under the Contract Disputes Act. The ASBCA handles appeals from defense agencies (Army, Navy, Air Force, DLA, DHA, etc.) and is a critical forum for small businesses challenging government contracting decisions. AI use by small business appellants without counsel is likely to become increasingly common.
Holdings
- Brief not struck after AI admission. Once Endure acknowledged AI use and the ASBCA’s show cause concerns, the Board proceeded on the merits rather than striking the brief.
- Contract claim dismissed. The incentive agreement was found to be an illusory contract — DHA reserved discretion to cancel, making the obligation optional. An illusory promise cannot serve as consideration, and no enforceable contract existed.
- Implied-in-fact contract theory rejected. Endure’s novel theory that a separate implied-in-fact contract arose through prime vendor enforcement of government policies was not supported by the certified claim or the complaint as filed.
“[Endure] appeared to rely on a court decision that does not exist and to rely on other court decisions that did not appear to support the propositions for which they were cited. We issued an order to Endure to show cause why we should not strike the brief. Endure responded by acknowledging that it used a generative artificial intelligence program to assist in drafting the brief.”
— Administrative Judge Herzfeld, ASBCA No. 64064
India Angle: AI in Government Contract Disputes Before Indian Tribunals
India’s government contracting regime — governed by the Government Contracts Act 1950, the General Financial Rules, and departmental procurement manuals — generates significant disputes. Small and medium enterprises (SMEs) challenging government procurement decisions before the Arbitral Tribunals, High Courts under Article 226, or sector-specific regulators frequently proceed without senior counsel. The Endure pattern — AI-assisted brief drafting by a small business without legal support — will recur in Indian contexts.
Relevant Indian Law
- Arbitration and Conciliation Act 1996: Government contract disputes are often resolved through arbitration clauses. Fabricated citations in arbitral submissions can undermine a party’s credibility before the arbitral tribunal and may constitute grounds for cost orders under Section 31A.
- Competition Act 2002 / Public Procurement Policy: Small businesses challenging government procurement decisions before the Competition Commission or tender evaluation committees use factual and legal submissions. AI hallucinations in these submissions could be treated as misrepresentations.
- Advocates Act 1961 — duty for counsel appearing before ASBCA equivalents: India’s DSCR (Defence Supply Chain Rules) and procurement tribunals operate like administrative courts. Advocates appearing in such forums must comply with the same citation accuracy standards as in civil courts.
Three Practical Tips
- In government contract disputes, know the tribunal’s citation standards before filing. The ASBCA’s immediate issuance of a show cause order for citation problems signals that administrative tribunals are as rigorous as civil courts. Indian procurement tribunals, arbitrators, and DSCR panels will similarly scrutinise fabricated citations.
- Small businesses without legal representation are highest risk for AI citation errors. Endure’s situation — a small business appearing pro se in a specialised administrative tribunal — is common in India. Procurement defence attorneys and legal aid services for SMEs should specifically address AI verification in their counsel.
- If you acknowledge AI use to a tribunal, do it promptly and cooperatively. Endure’s prompt acknowledgment of AI use in response to the show cause order appears to have mitigated consequences — the brief was not struck. In India, similar prompt disclosure before a tribunal or court would likely be treated as a mitigating factor.
Quick Takeaways
- The ASBCA — a major U.S. government contract tribunal — now has a documented AI hallucination case involving small business appellant’s brief.
- Acknowledging AI use promptly in response to a show cause order mitigated consequences — the brief was not struck despite containing a nonexistent case citation.
- Administrative tribunals and specialised boards are not exempt from AI citation scrutiny — they apply the same standards as federal district courts.
- An illusory promise (AI-generated or otherwise) cannot save a contract claim — the substantive law operates regardless of how the brief was drafted.
- In India: SMEs in government contract disputes before arbitral tribunals and administrative bodies face the same AI verification duty as parties in civil courts.