On October 21, 2016, the Department of Defense (DoD) issued its long-awaited Final Rule—effective immediately—imposing safeguarding and cyber incident reporting obligations on defense contractors whose information systems process, store, or transmit covered defense information (CDI). The Final Rule has been years in the making and is the culmination of an initial rule issued in November 2013, two interim rules published in August 2015 and December 2015, and years of comments and experience by DoD and its contractors.  The new Rule materially alters the predecessor rule in a number of respects and clarifies several important issues relating to contracting for cloud computing services.

 Key substantive changes include the following:

  • Adds new definitions or clarifies existing definitions for “covered defense information,” “covered contractor information system,” “export control,” the “other” category of CDI, and “operationally critical support.”
  • Directs that DFARS provisions 252.204-7008 and 252.204-7012 should not be used in solicitations and contracts “solely” for commercial-off-the-shelf (COTS) items.
  • Amends DFARS 252.204-7000 to clarify that fundamental research, by definition, does not involve any CDI.
  • Amends DFARS 252.204-7012 to:
    • Provide guidance on requests to vary from NIST SP 800-171 security controls and mandate that subcontractors notify the prime contractor (or next higher tier subcontractor) when submitting such a variance request;
    • Clarify that contractors must implement safeguarding requirements on all covered contractor information systems, not just those that support the performance of work on the contract;
    • Confirm that contractors are not required to implement any security requirements if an authorized representative of the DoD Chief Information Officer (CIO) has adjudicated a request to vary or determined that a security control is not applicable;
    • Require contractors to ensure that external cloud service providers (CSPs) used in performance of a contract to store, process, or transmit any CDI must: (i) meet security requirements equivalent to those established by the Government for FedRAMP moderate baseline; and (ii) comply with DFARS 252.204-7012’s reporting, protection, and access requirements; and
    • Clarify that the clause must be flowed down to subcontractors when CDI is necessary for performance of the subcontract.
  • Modifies DFARS 239.7602-1 to provide two exceptions where a contracting officer may award a contract to acquire cloud services from a CSP that has not been granted a provisional authorization by the Defense Information System Agency (DISA).

Our full analysis of the new Rule is available here.

Tags: CDI, Covered Defense Information, Cybersecurity, Defense, Department of Defense, DFARS, DoD, Rulemaking
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Photo of Susan B. Cassidy Susan B. Cassidy

Susan Cassidy co-chairs Covington’s Aerospace and Defense Industry Group, and has been advising government contractors for more than 35 years on the requirements imposed on companies contracting with the U.S. Government.

Susan’s practice focuses on the intersection of cybersecurity, national security, and supply…

Susan Cassidy co-chairs Covington’s Aerospace and Defense Industry Group, and has been advising government contractors for more than 35 years on the requirements imposed on companies contracting with the U.S. Government.

Susan’s practice focuses on the intersection of cybersecurity, national security, and supply chain risk management for companies that sell products and services to the U.S. Government. Susan advises contractors at all phases of the procurement cycle, and regularly:

advises clients on compliance obligations imposed by the FAR, DFARS, and other agency regulatory requirements;
leads internal and government False Claims Act (FCA) investigations addressing allegations of violations of government cybersecurity, national security, supply chain, quality, and MIL-SPEC requirements; and
advises clients who have suffered a cyber breach where U.S. government information may have been impacted.

In her work with global, national, and start-up contractors, Susan advises companies on all aspects of government supply chain issues including:

Government cybersecurity requirements, including the Cybersecurity Maturity Model Certification (CMMC), DFARS 252.204-7012, FedRAMP, controlled unclassified information (CUI), and NIST SP 800-171 requirements;
Evolving sourcing issues such as Section 889, counterfeit part requirements, Section 5949 semiconductor product and service restrictions, and limitations on sourcing a variety of products from China; and
Federal Acquisition Security Council (FASC) regulations and product exclusions.

 

Susan previously served as senior in-house counsel for two major defense contractors (Northrop Grumman Corporation and Motorola Incorporated) and is Chambers rated in both Government Contracts and Government Contracts Cybersecurity. Chambers USA has quoted sources stating that “Susan’s in-house experience coupled with her deep understanding of the regulatory requirements is the perfect balance to navigate legal and commercial matters.”

Susan is a former Public Contract Law Procurement Division Co-Chair, former Co-Chair and current Vice-Chair of the ABA PCL Cybersecurity, Privacy and Emerging Technology Committee.

Susan’s pro-bono work extends to assisting veterans in a variety of matters, as well as providing advice to elderly clients on their wills and other end-of-life planning documents.

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Photo of Michael Wagner Michael Wagner

Mike Wagner represents companies and individuals in complex compliance and enforcement matters arising in the public procurement context. Combining deep regulatory expertise and extensive investigations experience, Mike helps government contractors navigate detailed procurement rules and achieve the efficient resolution of government investigations and…

Mike Wagner represents companies and individuals in complex compliance and enforcement matters arising in the public procurement context. Combining deep regulatory expertise and extensive investigations experience, Mike helps government contractors navigate detailed procurement rules and achieve the efficient resolution of government investigations and enforcement actions.

Mike regularly represents contractors in federal and state compliance and enforcement matters relating to a range of procurement laws and regulations. He has particular experience handling investigations and litigation brought under the civil False Claims Act, and he routinely counsels government contractors on mandatory and voluntary disclosure considerations under the FAR, DFARS, and related regulatory regimes. He also represents contractors in high-stakes suspension and debarment matters at the federal and state levels, and he has served as Co-Chair of the ABA Suspension & Debarment Committee and is principal editor of the American Bar Association’s Practitioner’s Guide to Suspension & Debarment (4th ed.) (2018).

Mike also has extensive experience representing companies pursuing and negotiating grants, cooperative agreements, and Other Transaction Authority agreements (OTAs). In this regard, he has particular familiarity with the semiconductor and clean energy industries, and he has devoted substantial time in recent years to advising clients on strategic considerations for pursuing opportunities under the CHIPS Act, Inflation Reduction Act, and Bipartisan Infrastructure Law.

In his counseling practice, Mike regularly advises government contractors and suppliers on best practices for managing the rapidly-evolving array of cybersecurity and supply chain security rules and requirements. In particular, he helps companies assess and navigate domestic preference and country-of-origin requirements under the Buy American Act (BAA), Trade Agreements Act (TAA), Berry Amendment, and DOD Specialty Metals regulation. He also assists clients in managing product and information security considerations related to overseas manufacture and development of Information and Communication Technologies & Services (ICTS).

Mike serves on Covington’s Hiring Committee and is Co-Chair of the firm’s Summer Associate Program. He is a frequent writer and speaker on issues relating to procurement fraud and contractor responsibility, and he has served as an adjunct professor at the George Washington University Law School.

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