Recent DOD Audit on Controlled Unclassified Information Finds Contractors Not Secure

Have contractors implemented the NIST 800-171 controls? DOD Inspector General (IG) audit suggests not, recommends third-party audits. Are you ready?

A recent audit conducted in response to a request from the Secretary of Defense determined that DOD contractors did not consistently implement DOD‑mandated system security controls for safeguarding Defense information. Specifically, Defense Federal Acquisition Regulation Supplement (DFARS) clause 252.204-7012 requires contractors that maintain Controlled Unclassified Information (CUI) to implement security controls specified in National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171, which lists security requirements for safeguarding sensitive information on non-Federal information systems. The requirements include controls for user authentication, user access, media protection, incident response, vulnerability management, and confidentiality of information.

DOD IG Report Findings

The findings across the DOD contractors audited included deficiencies related to:

  • Multifactor authentication;
  • Enforcing the use of strong passwords;
  • Identifying network and system vulnerabilities;
  • Mitigating network and system vulnerabilities;
  • Protecting CUI stored on removable media;
  • Overseeing network and boundary protection services provided by a third-party company;
  • Documenting and tracking cybersecurity incidents;
  • Configuring user accounts to lock automatically after extended periods and unsuccessful login attempts;
  • Implementing physical security controls;
  • Creating and reviewing system activity reports, and granting system access based on the user’s assigned duties.

The audit also found that while DOD requires contractors to protect CUI by complying with NIST 800-171 requirements, DOD contracting offices did not establish processes to:

  • Verify that contractors’ networks and systems met National Institute of Standards and Technology security requirements before contract award;
  • Notify contractors of the specific CUI category related to the contract requirements;
  • Determine whether contractors’ access, maintain, or develop CUI to meet contractual requirements;
  • Mark documents that contained CUI and notify contractors when CUI was exchanged between DOD agencies and the contractor; and
  • Verify that contractors implemented minimum security controls for protecting CUI.

The effect of these findings is that DOD does not know the amount of DOD information managed by contractors and cannot determine whether contractors are protecting unclassified DOD information from unauthorized disclosure.

The results of the audit probably don’t surprise the DOD or its many contractors but the recommendations in the DOD IG report, combined with the proposed Cybersecurity Model Certification (CMMC), should have contractors making plans to immediately implement the NIST 800-171 security requirements. All signs point to a game-changing, pre-RFP validation of compliance making cybersecurity a “go/no-go” factor for DOD contract awards.

DOD IG Report Recommendations

Recommendations out of the DOD IG report included:

  • Revise its current policy related to assessing a contractor’s ability to protect DOD information to require DOD Component contracting offices, as part of the Request for Proposal and source selection processes, and requiring activities, during the contract performance, to validate, at least annually, that contractors comply with security requirements for protecting CUI before contract award and throughout the contract’s period of performance.
  • Develop and implement a policy requiring DOD Component contracting offices and requiring activities to maintain an accurate accounting of contractors that access, maintain, or develop controlled unclassified information as part of their contractual obligations.
  • Revise its current policy to include language that would require DOD Component contracting offices to validate contractor compliance with minimum security requirements. We also recommend that the DOD Component contracting offices, in coordination with requiring activities, implement a plan to verify that the internal control weaknesses for the contractors discussed in this report are addressed.

All these recommendations are in alignment with the proposed CMMC efforts led by Katie Arrington, and DOD contractors who have delayed NIST 800-171 implementation should take notice and act now. Mandatory third-party validation of security requirements is coming in 2020 and failing to act will likely result in exclusion from contracting with the DOD. Both the recommendations from the DOD IG audit and CMMC are proposing third-party validation of control implementation as part of the Request for Proposal and source selection processes – self-certification and implementation after you win the work are going away. Contractors will need to demonstrate compliance before responding to an RFP and that means taking the necessary steps now before these inevitable changes are implemented in 2020.

Prepare for CMMC and NIST 800-171 Third-Party Verification

CMMC proposes that all companies conducting business with the DOD must be certified. The level of certification required depends upon the Controlled Unclassified Information (CUI) a company handles or processes and the intent of CMMC is to combine various cybersecurity control standards such as NIST SP 800-171 into one unified standard for cybersecurity. Given NIST 800-171 security requirements are at the core of CMMC, and NIST 800-171 implementation has been mandated for nearly two years now, that’s where DOD contractors should focus their efforts. Under CMMC the DOD is building on and strengthening, not abandoning NIST 800-171. Implementing the NIST 800-171 security requirements now is the best way to prepare for CMMC and meet your existing contractual requirements around DFARS 252.204-7012 Safeguarding Covered Defense Information and Cyber Incident Reporting and NIST 800-171.

Implementing the NIST 800-171 requirements includes writing a System Security Plan (SSP) and with 110 security requirements, you can expect to be out of compliance with some number of those individual requirements. For requirements not yet implemented you will need to also document Plans of Action & Milestones (POA&Ms). The heavy lifting is in implementing the security requirements as you prepare for CMMC and controls like Multi-Factor Authentication and Incident Response which require time to fully implement. With 2020 less than six months away implementing all 110 security requirements will be a challenge and DOD contractors, subcontractors and vendors taking a wait and see approach to CMMC are ignoring the last decade of clear warning signs that security has become the foundation of acquisition. The DOD IG audit and recommendations are simply the most recent in a flurry of activity that should have contractors taking immediate action to comply.

5 Steps to CMMC Preparation

Download our 5 Step Guide to CMMC Preparation to plan and enable certification as a documented, automated outcome of day-to-day operations. This easy to follow guide presents a plan to prepare for CMMC in a way that fits your business and budget. Third-party certification is coming in 2020, get the compliance and control implementation expertise you need to stay competitive!


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