Trace2Policy: From Expert Behavior Traces to Self-Evolving Decision Agents

Tool-using language-model agents repeatedly rediscover procedures they have already executed, producing traces that mix reusable structure with retries, exploration, accidental ordering, and repeated lookups. We present TraceCompiler, a skill-guided system that mines clusters of noisy agent traces and compiles them into executable, mostly deterministic workflows. It admits an inter-tool dependency only when a consumer argument contains a value attributable uniquely to an earlier producer; every hard edge carries an auditable evidence tuple, and ambiguous relations are marked suspected and impose no ordering constraint. Bindings are classified as constants, user inputs, copied outputs, transforms, or residual LLM decisions. On T1, a mechanized form of the rule recovers producer-consumer dependencies at 0.928 precision and 0.943 recall over 15,775 def-use edges of its training split, against 0.711 F1 for adjacency and 0.712 for a frequency-thresholded directly-follows measure on identical data; the compiler skill run blind reaches 0.992 on 250 of those edges. On AppWorld we replay released trajectories in the deterministic simulator to recover masked return values and measure the rule against 563 token edges at 0.993 precision - a self-consistency check, since replay injects tokens by a related heuristic. We compile two recurring intents: a Venmo money-request intent reduces 34 observed API calls to 11 runtime calls and, under leave-one-out execution against the benchmark's own state tests, passes 15 of 21, the failing fold escalating rather than acting because its required branch was never observed; and a Spotify/Todoist intent the compiler correctly refuses to compile, because an irreversible side effect is under-determined. We measure call reduction but not offline compilation cost, so we claim no net efficiency result.

Organizations increasingly use oversight loops where one large language model (LLM) audits another's outputs alongside procedural traces of claimed steps. A common concern about such LLM-as-a-judge pipelines is that detailed traces make overseers gullible. Using signal detection theory, we audit five LLM overseers on 19 compliance tasks (4,551 analyzed judgments), varying only trace detail and evidence labeling. With disconfirming evidence always visible, error detection remains near ceiling. Instead, elaborate traces shift the decision criterion toward rejection, increasing false alarms in susceptible overseers. Without option labels, human-validated reason coding shows about 60% of false alarms cite an inability to tie evidence to its option. Labels eliminate this stated reason, yet residual rejection of correct work persists in those overseers and rises with trace detail. Procedural traces thus act as governance artifacts that shape oversight decisions. AI auditors should be evaluated by their decision criterion and false-alarm behavior, alongside accuracy.

LLM agents increasingly run policy-bound enterprise workflows such as document auditing, where they must apply rules consistently, ground every value, and stay auditable. Improving these agents is hard: operational feedback is sparse and unlabeled, edits to one rule can regress unrelated cases, and accuracy must improve without inflating inference cost or losing auditability. We present FRAMES, a closed-loop framework that cold-starts deployable skills from existing assets and then evolves them through consensus-based mutation, Pareto selection over accuracy and cost, and an anti-regression guarantee, all while preserving auditability. Deployed on our internal production system, FRAMES attains the best accuracy-cost trade-off among baselines, with the same gains reproduced on tau-bench.