Scale AI Files Lawsuit Against US Department of Defence in Contract Dispute
Scale AI, an artificial intelligence training company backed by Meta, has initiated legal action against the United States Department of Defence (DoD). The lawsuit, reportedly filed last month in the Court of Federal Claims, centers on a procurement dispute, with most court documents sealed and classified at the "secret/no foreign" level, obscuring the specific nature of the conflict and Scale's demands.
Background of the Dispute and Contract Loss
This legal move follows Scale AI's unsuccessful bid for a substantial contract from the National Geospatial-Intelligence Agency (NGA), a component of the DoD. In 2025, the NGA awarded a contract worth up to $708 million to Enabled Intelligence, another AI company, which has since joined the lawsuit as an intervenor defendant to safeguard its interests. This contract, potentially spanning seven years, represents the agency's largest data-training agreement and includes collaboration on the Pentagon's AI initiative, Project Maven.
Prior to the lawsuit, Scale AI filed a bid protest with the Government Accountability Office in December 2025, which was dismissed in January. Just two days after this dismissal, the company proceeded with its legal claim. Despite this setback, Scale AI had previously secured a $24 million, one-year contract from the NGA in 2024 for data labelling work related to Project Maven.
Scale AI's Stance and DoD Partnerships
In a statement to Business Insider, a Scale AI spokesperson declined to comment on the lawsuit, describing it as related to a "recent procurement decision." The spokesperson emphasized the company's support for the DoD's mission to deploy frontier AI capabilities to military personnel, stating, "Scale AI stands firmly with Secretary Hegseth and the Department of War in their mission to get frontier AI capabilities into the hands of warfighters. We are committed to ensuring the procurement process reflects the high standards required for our nation's most critical AI initiatives."
Scale AI has maintained a robust partnership with the DoD since 2020, securing multiple multimillion-dollar contracts. Notable agreements include:
- A $99 million contract in August 2025 to develop AI tools for the US Army.
- Collaboration with defence tech startup Anduril and Microsoft in March 2025 under the DoD's "Thunderforge" programme to deploy AI agents in the US military.
Company Profile and Recent Challenges
Known for its data labelling services that have enhanced AI chatbots for tech giants like Google and Meta, Scale AI received a significant $14.3 billion investment from Meta in June 2025, in exchange for a 49% stake in the business. However, the company has faced recent difficulties, including:
- Laying off 200 employees, constituting 14% of its workforce, following Meta's investment.
- Losing clients such as Google and xAI.
- Battling competition from new entrants attempting to poach its clients and employees.
Former Scale AI CEO Alexandr Wang, who left to become chief AI officer at Meta's Superintelligence Labs, has been active in advocating for AI advancement. After Donald Trump's second inauguration, Wang penned an open letter outlining five strategies for the president to promote AI within the first 100 days, highlighting the need for increased government spending on data and compute, akin to tech giants. He also attended an AI dinner at the White House in September 2025.
The lawsuit underscores the high-stakes environment of AI procurement in national defence, with implications for future contracts and technological deployment in military operations.
