Scale AI Sues DoD After Losing $708M Contract to Rival

Scale AI, the artificial intelligence training company backed by Meta, is locked in a legal battle with the U.S. Department of Defense following its loss of a high-stakes contract to a smaller competitor, Enabled Intelligence. The lawsuit, filed in the U.S. Court of Federal Claims, comes after Scale AI’s bid protest with the Government Accountability Office was dismissed in late January January 26, 2026.

The dispute centers around a seven-year contract, potentially worth up to $708 million, awarded to Enabled Intelligence by the National Geospatial-Intelligence Agency (NGA) in September 2025. The contract covers data labeling for artificial intelligence and machine learning applications, a critical component for projects like the Pentagon’s Project Maven, which aims to integrate AI into military operations. Enabled Intelligence, with fewer than 50 employees, secured the deal, signaling a shift in government procurement strategies.

While the specifics of Scale AI’s complaint remain largely sealed due to classified information – documents are expected to be classified at the “secret/no foreign” level – the loss represents a significant setback for the company, which has positioned itself as a leader in AI data infrastructure. Scale AI has secured numerous contracts with the DoD since 2020, including a $24 million, one-year contract with the NGA in 2024 for data labeling work related to Maven, a $99 million contract to develop AI tools for the Army and a five-year, $100 million enterprise agreement with the DoD’s Chief Digital and Artificial Intelligence Office (CDAO).

The NGA’s decision to award the contract to Enabled Intelligence underscores a growing trend: the prioritization of specialized expertise and secure data operations over the scale and brand recognition of larger companies. Data labeling, the process of annotating data to train AI models, is foundational for applications like satellite imagery analysis and threat detection. The government appears to be increasingly focused on companies that can deliver compliant data pipelines, maintain robust security postures, and demonstrate reliability in classified environments.

Scale AI’s recent trajectory has been marked by both significant investment and internal upheaval. In June 2025, Meta invested $14.3 billion in Scale AI for a 49% stake in the company. However, since then, Scale AI has undergone a series of changes, including laying off 14% of its workforce – approximately 200 employees – and losing clients like Google and xAI. The company is also facing increased competition from newer entrants vying for clients and talent.

The departure of Scale AI’s founder and former CEO, Alexandr Wang, to Meta as chief AI officer of Meta’s Superintelligence Labs, may also have factored into the government’s decision. Wang had previously advocated for increased U.S. Government investment in AI, outlining recommendations to President Trump in an open letter. He also attended the White House AI dinner in September 2025.

Enabled Intelligence’s success is attributed, in part, to its innovative workforce strategy. The company reportedly focuses on hiring neurodivergent talent for the precise and detail-oriented work of data labeling. This approach highlights how specialization can trump sheer scale in government procurement, particularly when dealing with sensitive national security applications.

The lawsuit filed by Scale AI is a signal that the company intends to vigorously defend its position in the defense AI market. The outcome of the case could have broader implications for how the government approaches AI procurement, potentially influencing the balance between established industry players and emerging, specialized firms. The case also highlights the increasing importance of data security and compliance in the rapidly evolving landscape of artificial intelligence.

Attorneys for Enabled Intelligence and the DoD did not respond to requests for comment.