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Thanks to the increasingly sophisticated and aggressive cybersecurity threats facing the U.S., there has been much focus recently on reinforcing the nation’s cybersecurity. Much of this effort has revolved around strengthening the Department of Defense (DoD) supply chain.

The Defense Federal Acquisition Regulation Supplement, or DFARS, has been working to encourage DoD contractors to proactively comply with certain frameworks in order to achieve this goal. Clause 252.204-7012, Safeguarding Covered Defense Information and Cyber Incident Reporting, is the latest mandatory addition.

Under the Clause, all contractors must comply with the National Institute of Standards and Technology’s Special Publication 800-171 (NIST SP 800-171), a framework that lays out how contractors must protect sensitive defense information and report cybersecurity incidents.

The NIST framework requires you, as a defense contractor, to document how you have met the following requirements in particular:

• Security requirement 3.12.4 requires the contractor to develop, document, and periodically update System Security Plans (SSPs) that describe system boundaries, system environments of operation, how security requirements are implemented, and the relationships with or connections to other systems.
Security Requirement 3.12.2 requires the contractor to develop and implement Plans of Action designed to correct deficiencies and reduce or eliminate vulnerabilities in their systems.

Read more about implementing SSPs and POAs.

Under the Clause, DoD contractors are obliged to submit evidence of their compliance with NIST SP 800-171 to the U.S. Government. However, the Clause goes beyond NIST compliance and sets out additional rules for the protection of Covered Defense Information (CDI).

Supply Chain Management

DFARS Clause 252.204-7012 aims to encourage you, as a contractor, to take a proactive role in the protection of CDI. Not only are you required to demonstrate compliance within your own business, but in order to strengthen the entire supply chain, you must take steps to ensure that your subcontractors comply, too.

It is the responsibility of your subcontractors to inform you if their practices deviate in any way from the DFARS and NIST 800-171 guidelines, and it is your responsibility to demonstrate that an equally secure alternative practice is in place before you share CDI with that subcontractor.

Reporting Cybersecurity Incidents

A cybersecurity incident is defined as a breach of security protocols that negatively impacts, compromises, or endangers CDI held on your systems or networks, or those of your subcontractors.

In the event of a cybersecurity incident, your responsibility under DFARS Clause 252.204-7012 is to report the incident to the DoD within 72 hours. You must present the affected data and all related data covering the 90 days prior to the date of the report, along with any infected software. You must also conduct a thorough systems review and identify ways in which you will prevent future breaches.

In the event that a subcontractor experiences a cybersecurity incident, they must report it to you, or to the next highest tier of subcontractor, and present the evidence as required. As the prime contractor, you’re then required to report the incident to the DoD and submit the evidence, as detailed above.

Cloud Service Provision

If you offer your own cloud services as part of your DoD contract, then DFARS states that you must enact the safeguards set forth in the Cloud Computing Security Requirements Guide (SRG), unless waived by the Chief Information Officer of the DoD. If you use a third-party cloud service, then you’re required to ensure that your cloud service provider follows the security provisions therein.

Don’t Know Where to Start?

A quick look at documents like the above and it’s clear to see why some contractors are still struggling with compliance long after the December 31st, 2017 deadline has passed. It truly is a daunting task bringing your business into line with these extensive regulations, especially when the stakes are so high.

That’s where a Managed Services expert like CyberSheath comes in. We’ve helped defense contractors large and small to achieve comprehensive DFARS and NIST compliance.

Put Your Cybersecurity Compliance in Expert Hands

We’ll take the stress and the guesswork out of compliance by handling every step of the journey, from assessment and gap identification to the development of robust System Security Plans and Plans of Action. And because we’re always monitoring the evolution of DoD frameworks, we’ll continue to update your plans in line with regulatory changes to guarantee ongoing compliance.

Let CyberSheath help you to protect your valuable DoD contracts and remain competitive in the defense supply chain. Contact us now for a no-obligation discussion to find out how.

 

5 Steps to DFARS Compliance

In the last decade, the way in which nation-states have targeted the U.S. has changed dramatically. Where warfare was once predictably physical in nature, more and more of today’s threats come via virtual and digital channels.

After more than a decade of massive intellectual property theft including the theft of massive amounts of highly sensitive data from a U.S. Navy contractor’s computer systems, allegedly by Chinese hackers, the Department of Defense (DoD) has sought new guidance on how to secure its $100bn supply chain in the face of modern threats.

In the recent report Deliver Uncompromised, researchers Mitre Corp. discuss how the Department of Defense (DoD) and intelligence agencies can adapt to meet the growing threat of cyber warfare. They identify a number of ways in which national security can be compromised remotely, including the virtual hijacking and sabotage of military equipment; the infiltration of software for espionage purposes; and the data theft to which the Navy contractor fell victim.

Beyond Compliance

Up until now, the focus has been on encouraging contractor compliance. A recent example is the National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171, a framework that lays out how contractors must safeguard sensitive defense information and report cyber security incidents. By December 2017, prime contractors were required to demonstrate exactly how they’d implemented mandatory policies and achieved full compliance.

However, the Deliver Uncompromised report argues for a full cultural shift in the way in which the issue of cybersecurity is framed, with an emphasis on the role of the contractor. Instead of simply requesting or even mandating co-operation in support of their security objectives — a reactive role — the report recommends that defense and intelligence agencies encourage contractors to share ownership of the problem itself and proactively develop solutions.

At present, the DoD chooses suppliers based on cost, schedule, and performance, but the report notes that this can actually encourage suppliers to cut corners on their security provision. Factoring in the price of implementing enhanced security measures makes the supplier less attractive to the DoD in terms of cost, but when the alternative is to eat the cost themselves, most businesses will choose to simply do the bare minimum in order to achieve compliance.

In order to avoid the ‘compliance effect’ and incentivize suppliers to go above and beyond, DoD is attempting to elevate security to a key metric in the procurement process, on par with cost, schedule, and performance. In making enhanced security a competitive advantage and not just a ‘checkbox’, the DoD is essentially leveraging its position as the primary source of revenue for many of its contractors in order to shape their behavior.

That’s not to say compliance is moving down the agenda; quite the opposite, in fact. Deliver Uncompromised identifies a number of major holes in current compliance legislation, noting that they undermine any ‘softer’ attempts by the DoD to influence suppliers.

Financial Liability

First, the report says, it’s unclear what tangible consequences a contractor will face in the event that their non-compliance with DoD mandates leads to a security breach. Because there are so few financial repercussions, the very real risk is that some suppliers will fail to commit the necessary resources to implement their contractual obligations, while others will ignore them altogether.

To address this risk, Deliver Uncompromised recommends that DoD re-examines financial liability processes for suppliers that fail to take reasonable or timely assurance measures to protect the DoD from a threat. It also implores the DoD to consider seeking the legislative authority to hold suppliers liable for gross negligence in circumstances where cybersecurity obligations have not been met.

Software Practices

Software was identified as a major area of vulnerability for the DoD supply chain, especially given the widespread use of open-source software components with uncertain origins. And yet, the report says, the current practice is to absolve users, operators, and even developers from responsibility for security threats arising from software failure.

Deliver Uncompromised calls for an overhaul of this policy and suggests that the DoD demand much higher standards of security throughout the life cycle of mission-critical software. It also recommends placing much greater accountability on users, operators, and developers, which may be achieved by soliciting the help of Congress to change laws surrounding software immunity.

What Does this Mean for You as a Defense Supplier?

If a significant proportion of your revenue depends on government contracts, it’s likely you already know that compliance is becoming an increasingly important deciding factor in the awarding of contracts. However, it’s no longer enough to simply comply.

Deliver Uncompromised is a crystal-clear statement of the DoD’s intent to reward suppliers that go above and beyond in terms of security. In fact, the cultural shift is already happening, with the 2017 case of IPKeys Technologies serving as a prime example.

IPKeys protested to the U.S. Government Accountability Office (GOA) when they lost out on a defense contract to a higher-priced competitor. While both companies met the mandatory cybersecurity compliance requirements, the awardee had demonstrated a proactive commitment to non-mandatory security frameworks, too. Despite their higher cost, the awardee went above and beyond compliance and received a higher value rating — and won the contract — as a direct result.

The GAO denied the protest, strengthening the notion that minimum security compliance is no longer enough to remain competitive. Should the DoD implement the recommendations outlined in Deliver Uncompromised — and they likely will, given the current concerns about foreign interference and cyberattacks — enhanced security will become a legal matter as well as a commercial one.

For you, that means getting ahead of the game and fortifying your cybersecurity now. While other suppliers continue to do the bare minimum in order to check off compliance boxes, your focus should be on strengthening security procedures and adding value wherever possible. Take these measures now, and when the legislative environment inevitably moves forward, you’ll be leading the way — not scrambling to keep up.

Want to Remain a Competitive Defense Supplier?

Then now is the time to start enhancing your security practices with a comprehensive, free cybersecurity evaluation from CyberSheath. Let us help you to make sense of the changing security environment and make sure your business stays one step ahead. Contact us now to arrange your free evaluation.

 

As cyber-attacks become more frequent and sophisticated, addressing tighter security needs has become a priority for the federal government. Enforcement of “Controlled Unclassified Information” (CUI) protection continues to intensify as private contractors and organizations are now required to upgrade their cybersecurity systems and overall procedures to keep up with these increasing threats. On April 24, 2018, the Department of Defense (DoD) issued draft guidance for assessing contractors’ System Security Plans (SSPs) and the implementation of security controls in NIST Special Publication (SP) 800-171.  If you’re a defense contractor, you’re required to comply with these regulations and provide “adequate security” for networks where covered defense information (CDI) is processed, stored, or transmitted. DoD issued two draft guidance documents. The first, “Assessing the State of a Contractor’s Information System,” provides guidance on four different objectives.  They include what must be in an RFP, how the source selection authority would evaluate the requirement, what resources are available for that evaluation, and the contract provisions that will be needed to implement the requirement during performance. The second draft guidance document, “DoD Guidance for Reviewing System Security Plans and the NIST SP 800-171 Security Requirements Not Yet Implemented,” was developed by DoD to determine the risks that an unimplemented security control has on an information system, and which of the unmet controls need to be prioritized. What does “adequate security” mean? At a minimum, defense contractors must implement the requirements in NIST SP 800-171 to become compliant. Contractors need to provide an SSP to prove the implementation of the security requirements, and also develop plans of action and milestones (POA&M) that describe how any unimplemented security requirements will be met.

Unimplemented Controls Receive a Value Rating

NIST 800-171 is comprised of 110 technical controls to ensure the best security policies and procedures.  DoD has decided to assess the risk of unimplemented controls by assigning a “DoD Value” for each security requirement ranging from 5 (highest impact on the cybersecurity system) to 1 (lowest impact on the cybersecurity system). These priority codes are used for priority rankings that NIST assigns to the NIST SP 800-53 Revision 4 security controls that are used for government information systems and which form the basis for NIST SP 800-171.

Non-Compliance is Not an Option 

In 2018, proposed DOD guidance is already moving to full enforcement of compliance. Compliance failures can lead to more serious consequences than a data breach.  Failure to comply with DFARS can lead contractors to incur penalties either by the United States Government (civil, criminal, contractual actions in law and administrative), or by individuals and private organizations that were damaged by lack of compliance (actions for damages).

  • Bid Protests: While SSPs and POA&Ms are important for determining “adequate security,” it’s still unclear the exact part they’ll play in bid protests and the implementation of NIST SP 800-171. After reviewing the implementation status during the pre-award stage, the DoD can make an unacceptable or acceptable determination, and ultimately decide if the contract should be rewarded. Another option is to evaluate implementation as a “separate technical evaluation factor.” During the pre-award process, contractors may choose to protest terms where a solicitation’s treatment of NIST SP 800-171 implementation fails to be consistent with DoD’s guidance. On the other hand, if a contract was rewarded to another contractor, disappointed offerors may consider challenging the award to another offeror where the assessment of the protester’s or awardee’s implementation of NIST SP 800-171 is inconsistent with the guidance documents. If the DoD notices inconsistencies between the implementation of NIST SP 800-171 and your SSP and POA&M, they could award the contract to another contractor. During 2018, contract protests awarded to higher-priced bidders were based in part on compliance with cybersecurity and employing more than the minimum security requirements in NIST SP-800-171.
  • Termination Risk: The accuracy of your SSP and POA&M, along with providing proof that you’re moving toward full compliance, is crucial. For the most accurate evaluation, the draft guidance states that solicitations and contracts must include contract data requirements (CDRLs) to “require delivery of System Security Plan and any Plans of action after contract award.” Now that both SSPs and POA&Ms are a contractual obligation, failure to be in compliance may provide a basis for termination if compliance isn’t completed. Or, if the SSP does not accurately state the implementation status of the contractor’s cybersecurity.
  • DCMA Audits: DoD has recently stated that as part of its audit function, DCMA will pull out all the stops to confirm all contractors have an SSP and POA&M.  However, DCMA will not be providing an analysis if the SSP fully complies with the NIST 800-171 security requirements. It’s unknown at this point if the DCMA would leverage any of DoD’s guidance in its review.
  • False Claims Act: If a contractor is audited by DoD and found not to have implemented DFARS/NIST 800-171, the contractor can be on the receiving end of numerous penalties. For example, if your SSP misrepresents your actual cybersecurity status, DoD can bring an action based on fraud, which is a False Claims Act violation. DoD may also be able to prove that the original SSP was key to the Department’s award decision. If DoD’s argument is successful, your earnings under the original contract are at risk, along with the reputation of your organization.

Make Compliance a Priority Before it’s Too Late!

At CyberSheath, we know that implementing these new security controls can seem like a daunting undertaking. We’ve successfully assessed and implemented the required NIST 800-171 controls for leading organizations in the defense industrial base supply chain.

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