Most federal defense contractors are aware that December 31, 2017 is the deadline for them to comply with National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171, Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations. However, many defense contractors (understandably) remain perplexed about not only the details of the requirements, but the basics. This article provides answers to some of the most basic, yet commonly asked, questions regarding the new requirements.
In a nutshell, what is required by December 31, 2017?
The Department of Defense amended the Defense Federal Acquisition Regulation Supple-ment (DFARS) in 2016 to provide for the safeguarding of Controlled Unclassified Inform-ation when transiting through or residing on a contractor’s internal network or information system. DFARS Clause 252.204-7012, Safeguard-ing Covered Defense Information and Cyber Incident Reporting, requires contractors to imple-ment NIST SP 800-171 to safeguard “covered defense information” that is stored on or processed in their internal network or information system. Additionally, DFARS Clause 252.204-7012 requires contractors to report, within 72 hours of discovery, any cyber incidents that may have affected “covered contractor information systems.” DFARS Clause 252.204-7008, Compliance with Safeguarding Covered Defense Information Controls, states that, by submitting an offer, “the Offeror represents that it will implement the security requirements specified by [NIST SP 800-171] . . . not later than December 31, 2017.”
What if my company cannot fully comply by December 31, 2017?
A December 2016 update to NIST SP 800-171 (Revision 1) provides some relief to covered contractors who cannot fully comply with the requirements by December 31, 2017. Revision 1, which provides guidance on the use of System Security Plans (or SSPs) and Plans of Action and Milestones (or POAMs), states in relevant part:
Nonfederal organizations should describe in a system security plan, how the specified security requirements are met or how organizations plan to meet the requirements. The plan describes the system boundary; the operational environment; how the security requirements are implemented; and the relationships with or connections to other systems. Nonfederal organizations should develop plans of action that describe how any unimplemented security requirements will be met and how any planned mitigations will be implemented.
In September 2017, the Director of Defense Pricing/Defense Procurement and Acquisition Policy issued a Memorandum addressing imple-mentation of DFARS Clause 252.204-7012. This Memorandum provides additional guidance on SSPs and POAMs as follows:
To document implementation of the NIST SP 800-171 security requirements by the December 31, 2017, implementation deadline, companies should have a system security plan in place, in addition to any associated plans of action to describe how and when any unimplemented security requirements will be met, how any planned mitigations will be implemented, and how and when they will correct deficiencies and reduce or eliminate vulnerabilities in the systems. Organizations can document the system security plan and plans of action as separate or combined documents in any chosen format.
The Memorandum further states that a “solicitation may require or allow elements of the system security plan which demonstrates/ documents implementation of NIST SP 800-171, to be included with the contractor’s technical proposal, and may subsequently be incorporated (usually by reference) as part of the contract[.]” However, the Memorandum reiterates that “DFARS Clause 252.204-7012 requires the contractor that is performing a contract awarded prior to October 1, 2017, to notify the DoD [Chief Information Officer] of any requirements of NIST SP 800-171 that are not implemented at the time of contract award.”
Must my subcontractors comply?
Yes. Covered defense contractors must include DFARS Clause 252.204-7012 in subcontracts, or “similar contractual instruments,” for “operationally critical support” or for which performance will involve “covered defense information.” Among other things, covered contractors must also require subcontractors to “[p]rovide the incident report number, automatically assigned by DoD, to the prime Contractor (or next higher-tier subcontractor) as soon as practicable, when reporting a cyber incident to DoD” as required in DFARS Clause 252.204-7012. Moreover, given that most covered prime contractors will be required, either explicitly or implicitly, to certify compliance with the requirements, prime contractors would be wise to require subcontractors to certify their own compliance to the prime contractor.
What are some of the consequences for non-compliance?
Potential consequences for noncompliance with DFARS Clause 252.204-7012 and NIST SP 800-171 include, but are not limited to: losing a contract award; being subjected to a bid protest; being found to have breached an awarded contract; being terminated for default; and/or negative past performance reviews. Potential consequences for falsely certifying compliance may include, but are not limited to: False Claims Act liability; liability under the various false statement statutes; default termination; negative past performance reviews; suspension; and/or debarment.
Wait, I have more questions!
Please contact your lawyer if you have any questions about any of the foregoing requirements or any related issues.