A native or web application is not working as expected. When viewing the request in a policy trace, you see the client response was 503 with an error stating the request could not be handled.
Usually, this scenario will have the application connecting to a port other than standard HTTP / HTTPS ports.
The client machine is running a local application which is listening on that port. This can be confirmed by completing a DNS lookup for the hostname where the loop-back IP 127.0.0.1 is returned.
This request should not be sent to the proxy as it should reach the client's NIC with the loop-back address and not the explicit proxy IP. A proxy bypass can be accomplished by specifying it in the PAC file or in the user's proxy settings (Search Internet Options in Windows search bar > Connections > LAN Settings > Advanced > Exceptions).