What is an AI hallucination, and what is at stake in a document that binds the company?

In brief.
A hallucination is a false statement produced confidently by a generative AI. It is not a bug: the model generates the most statistically plausible text, not the most truthful. In a conversation, it is a nuisance. In a tender or an audit questionnaire, documents in which every statement commits the company that signs, an invented certification can mean disqualification, contractual penalties or the company’s liability being called into question.

A structural phenomenon, not a teething problem

An LLM is trained to produce a probable, satisfying sequence of words. When the information requested does not exist in its knowledge, it does not run into a void: it fills it. It will happily write a convincing paragraph about your compliance with a standard you do not hold, because that paragraph resembles thousands of others seen in training. The more fluent the wording, the harder the error is to spot on review.

The safeguards are architectural

Restrict the answer space to the company’s approved documents only; require an identifiable source for every claim; attach a confidence score to every answer; and above all allow abstention, that is, flagging that the information is missing rather than inventing it. None of these mechanisms exists natively in an LLM used as is. One last, legal point: in most procedures, the bidder is answerable for the accuracy of its bid; “the AI wrote it” is no defence.

The Optivalue.ai approach

Optivalue.ai only allows an answer if it is backed by a source from the client’s repository, identified down to the document and the page. When the evidence is missing, the platform says so, with a score to back it up, and recommends how to close the gap before submission.
‍

Can hallucinations be eliminated entirely?
They can be made detectable and rare: grounding in a closed corpus, mandatory sourcing, scores, abstention. The residual risk is managed through targeted review.

‍Who is liable for a hallucination sent to the client?
The signing company, in every case.