PA3: Policy-Aware Agent Alignment through Chain-of-Thought
Authors: Shubhashis Roy Dipta, Daniel Bis, Kun Zhou, Lichao Wang, Benjamin Z. Yao, Chenlei Guo, Ruhi Sarikaya
Organizations: University of Maryland, Baltimore County · Amazon Alexa AI
Abstract
Conversational assistants powered by large language models (LLMs) excel at tool-use tasks but struggle with adhering to complex, business-specific rules. While models can reason over business rules provided in context, including all policies for every query introduces high latency and wastes compute. Furthermore, these lengthy prompts lead to long contexts, harming overall performance due to the 'needle-in-a-haystack' problem. To address these challenges, we propose a multi-stage alignment method that teaches models to recall and apply relevant business policies during chain-of-thought reasoning at inference time, without including the full business policy in-context. Furthermore, we introduce a novel Policy Recall reward based on the Jaccard score and a Hallucination Penalty for GRPO training. Altogether, our best model outperforms the baseline by 16 points and surpasses comparable in-context baselines of similar model size by 3 points, while using 40% fewer words.
LLM agents operating under organizational policies must comply with authorization constraints typically specified in natural language. In practice, such specifications inevitably contain ambiguities and logical or semantic gaps that cause the agent's behavior to systematically diverge from the true requirements. We ask: by letting an agent evolve its policy understanding through interaction and corrective feedback from pre-deployment testing, can it autonomously refine its interpretation to close specification gaps? We propose PolicyBank, a memory mechanism that maintains structured, tool-level policy insights and iteratively refines them -- unlike existing memory mechanisms that treat the policy as immutable ground truth, reinforcing "compliant but wrong" behaviors. We also contribute a systematic testbed by extending a popular tool-calling benchmark with controlled policy gaps that isolate alignment failures from execution failures. While existing memory mechanisms achieve near-zero success on policy-gap scenarios, PolicyBank closes up to 82% of the gap toward a human oracle.
LLM agents handle user requests on behalf of organizations through tool calls and must follow the company policies stated in their system prompts. Prior work approaches this as a safeguarding problem -- external checks that block non-compliant agent actions. We argue that policy adherence is a broader problem: real workflows unfold across many turns, require explicit user confirmation and prerequisite reads, and hinge on the content of the dialogue rather than on any single argument value. Meeting this bar requires (i) full conversation context, (ii) self-reasoning over the policy and the current dialogue, and (iii) conversation-specific remediation that guides the agent's next turn -- three capabilities that prior safeguard work has often underestimated. We introduce POLICYGUARD, a sub-agent verifier that shares the agent's view of the dialogue, reasons over the policy in context, and provides actionable feedback for the agent's next turn. On tau^2-BENCH airline across three vendors (GPT-5.4, Claude Sonnet 4.6, Gemini 2.5 Pro) with four trials per setting, POLICYGUARD improves PASS4 by +12.0 / +6.0 / +12.0 pp. Per-call analyses show POLICYGUARD achieves higher policy-violation recall while blocking roughly half as often as argument-level guards.
Large reasoning models improve performance by generating extended chain-of-thought (CoT) reasoning, but this behavior becomes inefficient when applied to LLM agents. Current LLM agents often generate verbose textual reasoning at every decision step and allocate reasoning effort nearly uniformly across turns, leading to substantial inefficiency in multi-turn agentic trajectories. We propose Adaptive Latent Agentic Reasoning (ALAR), a dual-mode framework that uses compact latent reasoning for routine turns and selectively escalates to explicit chain-of-thought when deeper deliberation is needed. ALAR learns latent reasoning by using the agent's actions as supervision anchors and is further optimized to use latent reasoning when it is sufficient for task success and reserve explicit CoT for harder decisions. Experiments on agentic search and tool-use benchmarks show that ALAR maintains comparable or better task accuracy while substantially reducing generated tokens by up to 43.6% in search and 84.6% in tool use. These results demonstrate that ALAR improves the accuracy-efficiency trade-off of LLM agents by reducing unnecessary textual reasoning while preserving explicit deliberation for harder decision steps.