Information Technology Contracting

This is the fifth in a series of Covington blogs on implementation of Executive Order 14028, “Improving the Nation’s Cybersecurity”, issued by President Biden on May 12, 2021 (the “Cyber EO”).  The first blog summarized the Cyber EO’s key provisions and timelines, and the second, third, and fourth blogs described the actions taken by various federal government agencies to implement the EO during June, July, and August 2021, respectively.  This blog summarizes  key actions taken to implement the Cyber EO during September 2021.

I.   Actions Taken During September 2021 to Modernize Federal Government Cybersecurity

The Office of Management and Budget (OMB) publically released a draft zero trust architecture strategy for federal agencies on September 9, 2021.  On that same day, the Cybersecurity and Infrastructure Agency (CISA) issued two draft documents designed to further OMB’s zero trust strategy: the Zero Trust Maturity Model and the Cloud Security Technical Reference Architecture.  Each of these documents was required by Section 3 of the Cyber EO to modernize and standardize federal government agency approaches to cybersecurity.


Continue Reading September 2021 Developments Under President Biden’s Cybersecurity Executive Order

This blog continues Covington’s review of important deadlines and milestones in implementing the Executive Order on Improving the Nations’ Cybersecurity (E.O. 14028, or the “Cyber EO”) issued by President Biden on May 12, 2021.  Previous blogs have discussed developments under the Cyber EO in June 2021 and July 2021.  This blog focuses on developments affecting the EO that occurred during August 2021.

The Cyber EO requires federal agencies to meet several important deadlines in August 2021.  These deadlines are in the areas of enhancing critical software supply chain security, improving the federal government’s investigative and remediation capabilities, and modernizing federal agency approaches to cybersecurity.  In addition, the National Institute of Standards and Technology (“NIST”) took several significant actions related to supply chain security in August 2021, not all of which were driven by deadlines in the Cyber EO.  This blog examines the actions taken by federal agencies to meet the EO’s August deadlines as well as the NIST actions referred to above.


Continue Reading August 2021 Developments Under President Biden’s Cybersecurity Executive Order

On May 12, 2021, the Biden Administration issued an Executive Order on Improving the Nation’s Cybersecurity (the “EO”).  The EO sets out a list of deliverables due from a number of governmental entities in June 2021 and successive months.  Our overall summary of the EO and its deliverables can be found here, and our discussion of the EO deliverables that were due in June 2021 can be found here.  This blog addresses the EO deliverables in July 2021.
Continue Reading July 2021 Developments Under the Executive Order on Improving the Nation’s Cybersecurity

On May 12, 2021 the Biden Administration issued an “Executive Order on Improving the Nation’s Cybersecurity” (EO).  Among other things, the EO sets out a list of deliverables from a variety of government entities.  A number of these deliverables were due in June, including a definition of “critical software,” the minimum requirements for a software bill of materials, and certain internal actions imposed on various federal agencies.
Continue Reading June 2021 Developments Under the Executive Order on Improving the Nation’s Cybersecurity

The Government Accountability Office (“GAO”) released a decision on Friday finding that the Department of Homeland Security (“DHS”) followed the wrong order of succession after Secretary Kirstjen Nielsen resigned in April 2019.  As a result, the Acting Secretaries who have served since then were invalidly selected.  In particular, GAO has questioned the appointments of Acting Secretary Chad Wolf, former Acting Secretary Kevin McAleenan, and Deputy Secretary Kenneth Cuccinelli.

GAO’s decision tees up a thorny question for DHS contractors:  If these officials were invalidly selected, what does it mean for the agency’s policies and procurement decisions made during their tenure?


Continue Reading [Updated] If the Acting DHS Secretary Was Unlawfully Selected, What Does that Mean for DHS Procurements?

(This article was originally published in Law360 and has been modified for this blog.)

Companies in a range of industries that contract with the U.S. Government—including aerospace, defense, healthcare, technology, and energy—are actively working to assess whether or not their information technology systems comply with significant new restrictions that will take effect on August 13, 2020.  These new restrictions prohibit the use of certain Chinese telecommunications equipment and services, and a failure to comply can have dramatic consequences for these companies.  The new restrictions also will have an immediate impact on mergers and acquisitions involving a company that does—or hopes to do—business with the Federal government.  In this article, we highlight some key considerations for M&A practitioners relating to these restrictions.

Background

On July 14, 2020, the U.S. Government’s Federal Acquisition Regulatory Council (“FAR Council”) published an interim rule to implement Section 889(a)(1)(B) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (“FY19 NDAA”).[1]  When the new rule takes effect on August 13, it will prohibit the Department of Defense and all other executive branch agencies from contracting—or extending or renewing a contract—with an “entity” that “uses” “covered telecommunications equipment or services as a substantial or essential part of any system.”  The restrictions cover broad categories of equipment and services produced and provided by certain Chinese companies—namely Huawei, ZTE, Hytera, Hangzhou Hikvision, Dahua, and their affiliates.[2]

The new rule will be applicable to all contracts with the U.S. Government, including those for commercial item services and commercially available-off-the-shelf products.[3]  Companies with a single one of these contracts will soon have an ongoing obligation to report any new discovery of its internal “use” of certain covered telecommunications equipment and services to the Government within one business day with a report of how the use will be mitigated ten business days later.[4]  Further, although companies can seek to obtain a waiver on a contract-by-contract basis from agencies, these waivers must be granted by the head of the agency, and may only extend until August 13, 2022 at the latest.[5]

The new rule is the second part of a two-stage implementation of Section 889’s restrictions on covered telecommunications equipment and services in Government contracting.  It builds on an earlier rule that implemented Section 889(a)(1)(A) of the FY19 NDAA on August 13, 2019 by prohibiting an executive branch agency from acquiring certain covered telecommunications equipment or services that is a substantial or essential part of any system.[6]

The new rule is expansive in scope, and its effects will be felt far beyond the traditional defense industrial base.  Thus, mergers and acquisitions practitioners are well advised to become familiar with the rule and consider how it might impact any future transaction where an acquisition target does at least some business with the Government or has aspirations to do so in the future.


Continue Reading M&A and Section 889: Due Diligence and Integration Considerations

In recent years, both Congress and the Executive Branch have made it a key priority to mitigate risks across the industrial and innovation supply chains that provide hardware, software, and services to the U.S. government (“USG”).  Five of these initiatives are likely to result in new regulations in 2020, each of which could have a fundamental impact on companies’ ability to sell Information, Communications, Technology and Services (“ICTS”) to the USG.  As these requirements begin to take hold, federal contractors should be mindful of potential impacts and the actions that can be taken now to prepare for increased USG scrutiny of their supply chain security.

Continue Reading Contractor Supply Chain Readiness – An Update on Expected Regulatory Changes

On May 5, 2020 the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency’s (“CISA”) Information and Communications Technology (“ICT”) Supply Chain Risk Management (“SCRM”) Task Force (the “Task Force”) released a six-step guide for organizations to start implementing organizational SCRM practices to improve their overall security resilience.  The Task Force also released a revised fact sheet to further raise awareness about ICT supply chain risk.

As we discussed in a prior blog post on the Task Force’s efforts, the Task Force was established in 2018 with representatives from 17 different defense and civilian agencies, as well as industry representatives across the information technology and communications sectors.  The Task Force has been focused on assessing and protecting security vulnerabilities in government supply chains.  Since its founding, the Task Force has inventoried existing SCRM efforts across the government and industry, including some of the practices reflected in the guide.
Continue Reading CISA Information and Communications Technology Supply Chain Risk Management Task Force Releases New Guidance on Security Resiliency

The Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency’s (“CISA”) Information and Communications Technology (“ICT”) Supply Chain Risk Management Task Force (the “Task Force”) recently released an interim public report.  The report describes the Task Force’s efforts over the last year to develop recommendations for securing the Government’s supply chain, and outlines the potential focus areas of each of its working groups over the coming year.

The report is particularly relevant to contractors that either sell ICT related products or services to the Government, or that sell ICT related components to higher tier contractors, because it offers some insight into potential supply chain risk management (“SCRM”) best practices, as well as requirements that the Government may seek to impose on contractors in the future.
Continue Reading CISA Information and Communications Technology Supply Chain Risk Management Task Force Issues New Interim Report

Compliance with the security controls in National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171 is only the beginning for contractors that receive controlled defense information (CDI) in performance of Department of Defense (DoD) contracts and subcontracts.  Faced with an evolving cyber threat, DoD contractors have experienced an increased emphasis on protecting DoD’s information and on confirming contractor compliance with DoD cybersecurity requirements.  This includes audits by the DoD Inspector General (IG) “to determine whether DoD contractors have security controls in place” to protect CDI and enhanced security controls for certain high risk contractor networks.  And on September 28, 2018, the Navy issued a policy memorandum calling for enhanced cybersecurity requirements, including some that have generated opposition within the defense community such as the installation of network sensors by the Naval Criminal Investigative Service on contractor systems.  Other requiring activities are reportedly requiring similar enhanced protections and NIST is expected to issue a public draft of Revision 2 to NIST SP 800-171 by the end of February, with an appendix of additional enhanced controls.

As discussed in our blog post here, on November 6, 2018, DoD issued final guidance to requiring activities for assessing contractors’ System Security Plans (SSPs) and their implementation of the security controls in NIST SP 800-171.  Since then, DoD has issued two additional guidance memoranda; one that includes contractual language for implementing the November 6th guidance and one that explains how DoD plans to confirm contractor oversight of subcontractor compliance with the DFARS 252.204-7012 cybersecurity requirements.


Continue Reading DoD Continues to Up the Ante on Cybersecurity Compliance for Contractors