A Few Good Clauses: Comparing LLMs vs Domain-Trained Small Language Models on Structured Contract Extraction

Deploying frontier large language models (LLMs) for domain-specific structured evaluation tasks incurs prohibitive latency, cost, and data-privacy overhead. We present a hybrid framework that fine-tunes a small language model (LLaMA 3.1 8B, 2.05% trainable parameters via LoRA) on only 219 curated examples and couples it with a deterministic rule-based postprocessing layer. Applied to multi-label compliance evaluation of conversational transcripts (18 heterogeneous output fields), our system achieves 100% JSON structural validity, 83.0% human-validated overall accuracy, and 100% accuracy on the most critical classification field in blind evaluation on 53 unseen production transcripts. On a single NVIDIA A100 GPU, inference completes in $\sim$2 seconds -- 2--5x faster than frontier APIs -- at USD 0.013 per evaluation versus USD 0.025--0.055 for proprietary alternatives, yielding 46--76% cost savings. We introduce targeted hard-negative augmentation for critical decision boundaries and formalize the hybrid neural-symbolic decomposition, demonstrating that domain-adapted small language models with postprocessing can match frontier model accuracy while dramatically reducing operational cost, latency, and privacy risk.

Large language models (LLMs) achieve strong relation extraction (RE), but their computational demands and reliance on proprietary APIs limit deployment in resource-constrained or privacy-sensitive settings. We investigate how far small language models (SLMs) can close this gap across general-domain and literary text. We evaluate five models from 360M to 3B parameters under three domain-composition regimes and two prompt-conditioned tuning styles (30 configurations), comparing them with zero-shot frontier LLMs and a discriminative RoBERTa baseline. Across nine benchmarks, the best sub-billion model, Qwen2.5-0.5B fine-tuned on pooled general-domain data, achieves a general-domain positive-class micro-F1 of 0.83, versus 0.69 for GPT-5.4 and 0.66 for Claude Sonnet 4.6 evaluated zero-shot. This does not imply that SLMs are intrinsically stronger; rather, targeted task adaptation enables 4-bit models deployable on a single consumer GPU to outperform general-purpose frontier systems under this protocol. An in-domain RoBERTa baseline also exceeds both frontier models, indicating that the gain stems from task adaptation rather than generative decoding. On literary RE, tuned SLMs reach 0.92 on the human-annotated Biographical benchmark versus 0.83 for GPT-5.4, and 0.833 versus 0.578 on the two-benchmark literary average. A targeted domain-adaptive pretraining case study yields no practically meaningful gain over supervised fine-tuning, while the cleanest within-family scale comparison shows only marginal improvement. These results show that, when task-specific data are available, compact task-adapted models can provide accurate, private, and hardware-efficient RE.

Extracting reporting obligations from EU legislation is critical for assessing and reducing regulatory reporting burden. However, distinguishing reporting requirements from structurally similar provisions requires specialised legal understanding. Current legal NLP methods lack specialised datasets with clear guidelines and comparative evaluation of extraction paradigms and domain adaptation strategies. We curate EURO-5K, a corpus of sentence-level reporting obligations and challenging negative examples from 136 EU legislative acts. On this dataset, we train and compare discriminative token-classification models (BERT-style) and generative span-extraction models (LLMs), evaluating both full fine-tuning and parameter-efficient QLoRA against baselines (pattern and dependency-based extraction, few-shot prompting). Results show that fully fine-tuned generic and legal BERT models achieve similar performance (0.89 F1), while fine-tuned LLMs match encoder accuracy for sentence-level extraction. Legal pretraining offers only small gains for generative models. In contrast, it is clearly beneficial when adaptation capacity is constrained, as parameter-efficient tuning of Legal-BERT outperforms its generic counterpart. Learning curve analysis demonstrates that legal pretraining accelerates early learning with minimal data. All approaches converge around 3K samples with diminishing returns thereafter, validating dataset sufficiency. Cross-dataset evaluation on two external regulatory corpora shows that our models behave as specialised reporting obligation extractors rather than generic regulatory classifiers. We release EURO-5K, trained models, and an interactive demo with explainability visualizations and structured RDF export. These demonstrate that both paradigms and parameter-efficient training provide practical tools for regulatory compliance automation.