United States: For Government Contractors, 2015 Is In Full Swing: New Cyber-Incident Reporting Requirements, It Acquisition Reform, And Strategic Sourcing Top Developments For The Coming Year

Last Updated: December 22 2014
Article by Keir X. Bancroft and Christina K. Scopin

Contractors with their eyes on hot-button issues such as cybersecurity legislation, information technology (IT) acquisition reform, and strategic sourcing policy have plenty to consider in the 2015 National Defense Authorization Act (NDAA) and a recent policy memorandum issued by Office of Management and Budget (OMB) Administrator Anne Rung. Some key items to consider:

  • Cybersecurity: In 2015, the Department of Defense must issue rules requiring "operationally critical contractors" to report cyber incidents in their network and information systems.
  • IT Acquisition Reform: Under the Federal Information Technology Acquisition Reform Act (FITARA), Chief Information Officers in Federal agencies will take key roles in the acquisition process, which could affect the nature of IT-related acquisitions for years to come.  FITARA also sharpens the Government's FOCUS on strategic sourcing.
  • Strategic Sourcing and Category Management: In an initiative that complements strategic sourcing, OMB has established "category management" as a key Federal acquisition strategy, which will foster Government-wide purchasing of items, such as IT hardware and software, by one source instead of through multiple agencies.

For a broad array of contractors, those "operationally critical contractors" working with the DoD, providers of IT-related supplies and services, and those supplying "categories" of supplies throughout the Federal government, these changes will affect their daily operations and how they market and sell to their Federal customers in 2015 and beyond.

Cybersecurity Reporting Obligations under NDAA Section 1632

Summary

The Department of Defense in 2015 must establish cyber incident reporting procedures for contractors designated as "operationally critical" based on their supply of transportation and logistics services in support of Armed Forces contingency operations. Under the rule, operationally critical contractors must rapidly report "cyber incidents" that actually or have the potential to adversely affect their information, or information systems. Under the NDAA, DoD will develop a process for designating the contractors as "operationally critical contractors," and develop means of assisting contractors with a number of key considerations in the reporting process, including identifying and addressing cyber incidents, protecting trade secrets and other sensitive or proprietary information, and maintaining a limited focus on the disclosure of cyber incident information.

Under Section 1632, the DoD must require that each cyber incident report include:

  • An assessment by the contractor of the effect of the cyber incident on the ability of the contractor to meet the contractual requirements of the Department;
  • The technique or method used in such cyber incident;
  • A sample of any malicious software, if discovered and isolated by the contractor, involved in such cyber incident; and
  • A summary of information compromised by such cyber incident.

Take-Aways

Contractors must consider the upcoming Section 1632 cyber incident reporting requirements in light of a patchwork of existing and projected DoD cybersecurity requirements, including:

  • DoD's existing rule on Safeguarding Unclassified Controlled Technical Information under DFARS 252.204-7012, a requirement incorporated into all DoD contracts, and flowed down to all subcontractors and information services providers;
  • Section 941 of the 2013 NDAA, requiring DoD to promulgate rules for cleared contractors to report successful cyber-penetration of their network or information systems (the rule has not yet been promulgated); and, to the extent applicable,
  • DoD Instructions 8500.01, Cybersecurity, and 8510.01, the Risk Management Framework for Information Technology, which in 2014 replaced the Defense Information Assurance Certification and Accreditation Process.

Changes Implemented By FITARA Under NDAA Section 831 and Beyond

Summary

The NDAA at Section 831 enacts key components of FITARA, which reforms the IT acquisition process. In an effort to streamline Federal IT procurements, Federal civilian agency heads under FITARA are required to give agency Chief Information Officers (CIOs) key roles in planning, budgeting, execution, and reporting on IT purchases, which coincides with their authority for the management, governance, and oversight of agency IT. CIOs will be authorized to approve agency IT budget requests; certify incremental development of agency IT investments; funding for IT services and programs; and will be responsible for appointing CIOs within agency component organizations.

FITARA also emphasizes the Government's focus on strategic sourcing. Section 836 requires new rules in 2015 that will obligate agencies to document their contract files if they purchase services or supplies falling within the Federal Strategic Sourcing Initiative (FSSI), but they choose not to use FSSI for making the purchase. The documentation will need to detail the price and non-price factors differentiating the items offered under the Initiative compared to the source or sources used to make the purchase.

Take-Aways

Given the heightened stature of CIOs under FITARA, contractors should consider the following:

  • Re-calibrate their understanding of the Federal IT procurement process. A contractor used to limiting its interactions to agency acquisition or program offices will need to re-consider the involvement of the CIO, who will possess greater technical knowledge and face many more competing agency priorities in planning for and executing the agency's IT procurement strategy.
  • Consider the potential for shifting IT procurement opportunities. As CIOs seek ways to reduce perceived overlap in IT procurements, contractors may find that follow-on work to their current IT-related contracts fails to appear. Any incumbent contractor would be well-served to inquire if its customer agency will seek to re-procure its IT needs under a similar contract vehicle in the future, or if the CIO has other plans for reducing perceived requirements overlap.

Further, given FITARA's focus on strategic sourcing, contractors should:

  • Explore current and future solutions proposed for purchasing under FSSI, and be aware of proposed rules promulgating FITARA's strategic sourcing requirements. Depending on how the rule is promulgated in 2015, contractors will have an opportunity to make comments for the Government's consideration before it is finalized.

OMB Policy Memorandum: Using "Category Management" to Transform the Marketplace

Summary

Outside of Congress, the OMB mapped out the concept of "category management" as another means of strategically sourcing similar services and items of supply across the Federal government. Under the OMB Policy Memorandum titled "Transforming the Marketplace: Simplifying Federal Procurement to Improve Performance, Drive Innovation, and Increase Savings," category management will be used to reduce duplication in contract awards for the same or similar goods and services, in many cases to the same contractor, across various agencies.

Category management will focus on streamlining and strategically sourcing "commonly purchased goods and services" using common categories beyond those under the FSSI, such as IT hardware and IT software for example. The OMB explains common categories will facilitate transparency and encourage the exchange of best buying practices, performance standards and assessments, and other key contract information among agencies. Importantly, the memorandum also directs that "[e]ach category will be led by a senior Government executive who is a true expert in the category and who will develop a Government-wide strategy to drive improved performance."

In addition to category management, the OMB in 2015 will develop a plan to recruit the Government's first "Vendor Manager" for top IT commercial contractors. This will address a system where "[r]elationships with vendors are still managed individually across thousands of procurement units[,]" and will mirror[] other governments and industry, who manage their vendor relationships as a single enterprise."

Take-Aways

The OMB's Policy Memorandum should trigger a few considerations from contractors:

  • Consider areas of potential consolidation into singular categories. While the effects may not be immediate, category management may impact the way government contractors target contracting opportunities and develop responsive, competitive proposals. For example, the consolidation of various goods and services under common categories will require refocused business development efforts directed towards individuals with deep technical understanding of the subject goods and services.
  • Consider the effects of increased transparency. As contracting agencies seek to increase transparency in performance assessments and service/product pricing, a contractor will need to revisit its business strategy. With purchasing for a product centralized under one category, the contractor may have to re-think its teaming partners to ensure it is effectively positioned to provide competitive products. Further, the contractor will have to re-consider its pricing strategy if procurement officials will have access to pricing data for similar products across Federal agencies.
  • IT contractors should pay particular attention to OMB's effort to establish a single Vendor Manager. The outcome could affect many IT contractors' relationships with their federal counterparts in 2015 and beyond.

Venable's Government Contracts Practice Group will continue to monitor these developments in the coming year. For more information on how the new provisions in the 2015 NDAA or the OMB's latest policy memorandum might impact your business, please contact Keir Bancroft, Christina Scopin, or another member of Venable's Government Contracts Practice Group.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.