Bud ContextCompact 2.0: Context Compaction for Agent Success and Accuracy with Small Language Models and Constrained Context Windows

Jithin VG, Ditto PS

Agents that work for many turns outgrow the context window of the model that serves them, and on small language models (SLMs) and constrained inference systems that window is small. Context compaction replaces older turns with a summary so a session can continue, but it is lossy, costs a model call, and can help or hurt depending on when it runs. We describe Bud ContextCompact 2.0, the compaction built into the Bud agent runtime, and evaluate it in two settings. On recall questions over recorded agent sessions, compaction to a 16K budget raised a 1.2B-parameter model's accuracy to 0.335, from 0.247 with truncation and 0.176 with its full 32K history (p < 0.001), and raised a 9B model from 0.515 (truncation) to 0.577 (p = 0.04). On 100 SWE-bench Verified tasks run end to end by a 27B reasoning model on a 49K-token window (556 graded sessions), compaction raised the resolve rate on long sessions from 41% to 53% (+12.3 points, 95% CI +1.6 to +23.0, McNemar p = 0.043), left short sessions unchanged, and used 13% fewer tokens per solved task at equal total cost. The main failure without compaction was not the history overflowing but a reasoning turn exhausting the room the history…