At long last, the Department of Defense (“DoD”) has provided its interim rule, published in the Federal Register on September 29, 2020, amending the Defense Federal Acquisition Regulation Supplement (“DFARS”) to set forth requirements for the Cybersecurity Maturity Model Certification (“CMMC”) program, as well as new requirements for a “NIST SP 800-171 DoD Assessment Methodology.”  The interim rule is effective November 30, 2020, and comments to the interim rule should be submitted by November 30 as well.  Continue reading for our breakdown of key provisions.
Continue Reading DoD’s Long Awaited Rule on CMMC – Plus a New Cybersecurity Assessment Methodology for Contractors to Start Right Now

A lot has happened since the Department of Defense (“DOD”) released its Cybersecurity Maturity Model Certification (CMMC) v. 1.0 back in February (see our prior discussion here).  In addition to developments with the CMMC Accreditation Body (“CMMC AB”), DOD has clarified applicability of the program to Commercially available off-the-shelf (“COTS”) providers and the impact of COVID-19 on program implementation.     
Continue Reading DOD CMMC Update – Third Party Auditors Gear Up and COTS Providers Get a Pass

On January 30, 2020, the Department of Defense (“DOD”) released its Cybersecurity Maturity Model Certification (“CMMC”) v.1.0, after releasing several draft versions of the document over the past year.  
Continue Reading CMMC Version 1.0: Enhancing DOD’s Supply Chain Cybersecurity

The Government remains intensely focused on how best to protect its Controlled Unclassified Information (CUI) once it is released to contractors. In a shift from its initial approach of “we will take the contractor’s word for it,” the Department of Defense (DoD) announced in June 2019 it is in the process of developing a new cybersecurity certification program for its contractors, which will involve using third party auditors to validate contractor compliance with required security controls. In addition, on June 19, 2019, the National Institute of Standards and Technology (NIST) released two new highly-anticipated draft special publications – NIST SP 800-171, Rev 2 and NIST SP 800-171B – with a tight turnaround time for comments by July 19, 2019.
Continue Reading Cyber Update: DoD Contractor Cybersecurity Certification and 33 New Enhanced Controls to Combat the Advanced Persistent Threat

The April issue of National Defense Magazine brought a well-written article by Susan Cassidy and her colleagues at Covington & Burling LLP on a recent DOD IG report analyzing (and criticizing) spare aviation parts pricing, even though the report concluded that the contractor in question had complied with the Truthful Cost or Pricing Data Act. The article addresses the IG’s concept of a fair profit – which is abjectly divorced from reality – and it notes that the GAO has been conducting a study of spare parts purchasing with a promise of recommendations to improve transparency in this area. I commend the article to anyone who operates in the spares market and wants to know where the Government is heading in relation to spares pricing.

With the IG and the GAO injecting themselves – yet again – into the spare parts market and decrying the rapacious contractors who dare to sell at prices that the Government regards as outrageous (after all, why in the world would anyone think that a profit rate in excess of 15% on a firm fixed price contract was reasonable?) it seems like a good time to revisit the reasons why the Government’s periodic complaints about spare parts pricing are generally myopic and wrong. And so, because no criticism of Government contractors ever goes away forever, I offer for your consumption a refresher: the re-publication of a posting that I authored in November 2014, entitled “How Dare You Charge That for a Spare Part!” – The Untold Story of the X27 Interface Assembly” –
Continue Reading Resurrecting the Spare Parts Bogeyman – A Refresher on Why the Government Gets It Wrong

Reprinted from The Government Contractor, with permission of Thomson Reuters. Copyright © 2017. Further use without the permission of West is prohibited. For further information about this publication, please visit http://legalsolutions.thomsonreuters.com, or call 800.328.9352.

The Department of Defense final rule for safeguarding covered defense information requires contractors to implement the security controls in National Institute of Standards and Technology Special Publication 800-171 by December 31. See 81 Fed. Reg. 72986; Chierichella, Bourne and Biancuzzo, Feature Comment, “Achieving Cyber-Fitness In 2017: Part 1—Planning For Compliance,” 59 GC ¶ 25. In enacting the final rule, the drafters created “[n]o new oversight paradigm” or certification requirement. 81 Fed. Reg. 72990. More recently, in response to questions from industry on compliance with NIST SP 800-171, DOD stated,

The rule does not require “certification” of any kind, either by DoD or any other firm professing to provide compliance, assessment, or certification services for DoD or Federal contractors. Nor will DoD give any credence to 3rd party assessments or certifications—by signing the contract, the contractor agrees to comply with the terms of the contract. It is up to the contractor to determine that their systems meet the requirements.

Some companies with limited cybersecurity expertise may choose to seek outside assistance in determining how best to meet and implement the NIST SP 800-171 requirements in their company. But, once the company has implemented the requirements, there is no need to have a separate entity assess or certify that the company is compliant with NIST SP 800-171.
Continue Reading Achieving Cyber-Fitness in 2017: Part 3—Proving Compliance and the Role of Third-Party Auditors

The pricing of spare parts has been a subject of Government criticism for decades.  Pick up any DCAA or IG audit report relating to spare parts or any intra-agency memorandum on the topic and you will sense the dudgeon with which the Government reacts to the prices of those parts.
Continue Reading “How Dare You Charge That for a Spare Part!” – The Untold Story of the X27 Interface Assembly

The Inspector General Act of 1978 aimed to “consolidate existing auditing and investigative resources to more effectively combat fraud, abuse, waste and mismanagement in the programs and operations of [the executive branch].” To fulfill this mandate, the Act created the Offices of Inspector General (“OIG”) in various executive departments and agencies, including the Department of Defense (“DOD”), and authorized them to conduct and supervise audits and investigations to prevent and detect fraud, waste, and abuse. The DOD OIG’s primary investigative weapon has been the subpoena. More recently, however, the DOD OIG has subtly expanded its investigative arsenal by calling upon the Defense Contract Audit Agency (“DCAA”) to step up its fraud inquiries and by conducting more “Quality Assessments” and “Audits” without sounding the warning shot of the subpoena.
Continue Reading OIG Investigations (Without Subpoena Bells and Whistles) Coming to a Program Near You

By David Gallacher 

Last month we wrote about a provision in the proposed 2013 National Defense Authorization Act (“NDAA”) that would have given the Defense Contract Audit Agency (“DCAA”) statutory authority to demand a company’s internal audit reports in order to audit the efficacy of a company’s internal business systems. Surprisingly, the authorization, as originally proposed, was modified in the final legislation. While Congress directed DCAA to issue new guidance regarding auditor access to internal audit reports, Congress stopped short of giving DCAA actual authority to demand such reports. As such, contractors will remain at loggerheads with DCAA auditors who try to exceed their statutory authority.


Continue Reading Smash & Grab Redux – Congress Seems to Give DCAA Permission But Forgets to Give It Authority

By David Gallacher 

The Defense Contract Audit Agency (“DCAA”) has long sought access to contractors’ internal audit reports in connection with the routine audit of contractors’ business systems. Contractors have, in most cases, successfully resisted requests for such access on the grounds that DCAA has no statutory authority to request such documents. But that may soon change. Section 843 of the Senate version of the 2013 National Defense Authorization Act (S. 3254) would grant DCAA broad access to contractor internal audit information.


Continue Reading Smash & Grab – DCAA Poised to Gain Access to Contractor Internal Audit Reports

By David S. Gallacher and Kerry O’Neill

Last April, we wrote about proposed changes to Department of Defense ("DoD") reporting requirements for independent research and development ("IR&D"), raising concerns about how the proposed change would tie recoverability of IR&D costs to new reporting and disclosure requirements. Recently, Defense Federal Acquisition Regulation Supplement ("DFARS") 231.205-18(c) was finalized, with changes. See 77 Fed. Reg. 4632 (Jan. 30, 2012). This final rule is a mixed bag that got some things right, but also leaves some of the most serious issues unresolved.


Continue Reading Final Rule for IR&D Reports Fails to Address Most Serious Questions