Innovation

How AI Mistakes Cost Exdrog a $4M Road Contract

Exdrog submitted an unrealistically low bid based on a fictitious tax ruling.

Updated on

November 25, 2025

AI Hallucinations — Parts of Exdrog’s documentation were AI-generated and false. (Photo: Courtesy)

A Polish construction firm has been excluded from a major public tender after its bid included AI-generated material citing fictitious tax rulings.

Exdrog submitted an unrealistically low bid based on a fictitious tax ruling, sparking a backlash that led to its disqualification from the $4.26 million Małopolska road maintenance project.

The Kraków Provincial Roads Authority initially regarded the bid as the most cost-effective. However, rival companies quickly flagged irregularities in the accompanying 280-page justification.

“We demonstrated that the contractor…used artificial intelligence to develop explanations for the abnormally low price,” said Jarosław Sroka, partner at law firm BSJP, representing competing bidder Mika.

“It cited non-existent, never-issued tax rulings that allegedly concerned similar cases.”

The dispute was referred to Poland’s National Appeal Chamber (KIO), the state body responsible for handling public procurement appeals. KIO confirmed that portions of Exdrog’s documentation were AI-generated and contained false information.

“The allegations in the appeal, indicating that the contractor, Exdrog, used artificial intelligence in submitting its extensive, 280-page explanations and, as a result, provided false information, have been confirmed,” said KIO spokeswoman Agnieszka Trojanowska.

The Chamber ruled that Exdrog failed to verify the AI-produced content, misleading the contracting authority. It described the error as an oversight rather than deliberate fraud, yet disqualified the company’s bid and ordered the authority to reassess the remaining submissions.

Exdrog’s president, Krystian Barczyk, denied knowingly using AI inappropriately and suggested the ruling focused on the bid’s low price.

“The [KIO] ruling did not provide detailed information on the reasons for the rejection. Nor was there any mention of the use of artificial intelligence,” he said.

Barczyk added that the firm may appeal the decision after receiving the full justification.

The case has sparked debate over how AI should be used in public tenders. Barbara Dzieciuchowicz, president of the National Chamber of Road Construction, warned that unverified AI could increase costs rather than save time.

“To use AI effectively, you must be smart and carefully verify the information it produces,” she said, noting that verification can be as time-consuming as preparing documents manually.

Jan Styliński from the Polish Construction Employers’ Association called for legal frameworks to regulate AI in tenders, defining authorship, verification duties, and acceptable use.