United States: The Shifting Sands Of Cybersecurity: DOD's Interim Rule Further Burdens Contractors

The Department of Defense (DOD) earlier today issued an interim rule, effective immediately, that significantly increases existing cybersecurity requirements for DOD contractors. The requirements in the interim rule, available here, have broad applicability to DOD contractors at both the prime and subcontract levels, including commercial item and small business contractors. Contractors can expect these requirements to begin showing up in new DOD contracts immediately and should begin taking steps to ensure compliance.

The interim rule contains a number of new and revised DOD cybersecurity requirements. The key issues are summarized below.

Scope of the DOD requirements

The interim rule significantly expands the scope of the prior unclassified controlled technical information (UCTI) clause's safeguarding and reporting requirements. Whereas the prior UCTI clause applied only to unclassified controlled technical information, the new clause—now titled "Safeguarding Covered Defense Information and Cyber Incident Reporting"—applies more broadly to all "covered defense information."

"Covered defense information" includes controlled technical information as well as export controlled information, critical information related to operations security and any other information marked or otherwise identified in the contract that requires safeguarding under relevant law and policy, including private and proprietary business information. The interim rule further clarifies that the definition of "controlled technical information" does not depend, as it did under the prior UCTI definition, on whether the information "is to be marked" with applicable DOD distribution statements.

This expanded definition, coupled with the clause's broad flowdown requirement, means that the revised clause requirements likely will apply to virtually all DOD contractors at the prime and subcontract levels. The interim rule also revises Part 212 of the Defense Federal Acquisition Regulation Supplement (DFARS) to clarify that the rule's requirements are applicable to commercial item contracts and subcontracts.

Security controls

Additionally, internal contractor information systems that contain covered defense information are subject to new safeguarding requirements. The interim rule removes the clause's previously required security controls from National Institute of Standards and Technology (NIST) Special Publication (SP) 800-53. DOD replaces those requirements with the controls from the recently-issued NIST SP 800-171, issued on June 18, 2015, and previously discussed here.

The National Archives and Records Administration (NARA) in May 2015 issued a proposed rule, discussed here, that would establish a government-wide policy related to the identification and safeguarding of controlled unclassified information. NARA stated in connection with that rule that it intended to promulgate a Federal Acquisition Regulation (FAR) clause that would apply the requirements of NIST SP 800-171 to contractors. The Office of Management and Budget (OMB) likewise recently proposed guidance seeking to require the use of these same NIST SP 800-171 controls on a government-wide basis for internal contractor information systems, discussed here. DOD's decision to use the same NIST standards proposed by OMB and NARA is a welcome step to achieve consistency in cybersecurity standards across the federal government.

DOD in the interim rule also creates a new clause, DFARS 252.204-7008, which states that a contractor prior to contract award can provide a written explanation to the government justifying deviations from the NIST SP 800-171 controls. The prior DFARS UCTI clause had a similar provision, although not required pre-award, allowing contractors to provide this written explanation related to the NIST 800-53 controls. Under the interim rule, if seeking a deviation, a contractor must explain: (i) how the company has in place alternative security controls that "compensate for the inability to satisfy a particular requirement" of the NIST SP 800-171 standards or (ii) that a particular control is inapplicable. The new clause likewise clarifies that the contractor may either comply with the NIST SP 800-171 requirements or provide for alternative but equally effective security measures, a determination which must be approved by DOD prior to contract award.

Reporting requirements

The interim rule also expands reporting obligations. The rule requires contractors that discover a cyber incident that affects a covered contractor information system or information contained therein to investigate and report that incident to DOD. As part of its implementation of Section 1632 of the 2015 National Defense Authorization Act, DOD also requires contractors to investigate and report a cyber incident that affects the contractor's ability to perform "operationally critical support" functions of a contract. Subcontractors are required to report cyber incidents to both the prime contractor and the government, with lower-tier subcontractors required to report cyber incidents up the chain of privity until the prime contractor is reached.

In addition, the rule modifies DFARS 252.204-7012 to permit DOD to release certain contractor information in a number of circumstances, including "to entities with missions that may be affected by such information" and "for national security purposes." This expands the permissible reasons for sharing included in the prior version of the clause, which had limited the government's use of contractor information only to "authorized persons for purposes and activities consistent with [the prior UCTI] clause." Because contractor information now may be disclosed outside the government, contractors should clearly mark information provided to DOD and carefully consider whether particular information should be disclosed in connection with a cyber incident.

The interim rule further establishes DFARS 252.204-7009, Limitation on the Use and Disclosure of Third-Party Contractor Reporting Cyber Incident Information. This clause is required in contracts that involve contractor support for government activities related to safeguarding covered defense information and cyber incident reporting. It imposes nondisclosure obligations on contractors handling reporting information and provides that a contractor's breach of its nondisclosure obligations may be subject to criminal, civil, administrative and contractual actions brought by the government, or, importantly, by the impacted reporting party.

Cloud computing requirements

And if the foregoing was not enough, the interim rule also contains a number of new requirements relating to the acquisition of cloud computing services. The interim rule adds a new DFARS subpart, 239.76, which formalizes DOD guidance in this area and mandates that DOD may only award contracts for cloud computing services to contractors that have obtained a provisional authority to operate from the Defense Information Systems Agency (DISA). The new subpart requires the inclusion of specifically enumerated government protections in any DOD cloud services purchase order.

The interim rule also establishes two new contract clauses, DFARS 252.239-7009, Representation of the Use of Cloud Computing, and DFARS 252.239-7010, Cloud Computing Services, for use in any acquisition for information technology services. These clauses require contractors to: (i) implement administrative, technical and physical safeguards and controls outlined in DISA's Cloud Computing Security Requirements guide; (ii) maintain all government data in the United States unless authorized otherwise in writing; and (iii) restrict access to government data. DFARS 252.239-7010 also mandates that contractors report all cyber incidents related to the cloud services provided under the contract and imposes reporting and compliance obligations that parallel the access and investigation cooperation requirements included in the new UCTI clause.

Comments on the interim rule are due by October 26, 2015. Dentons lawyers will continue monitoring key developments in this area. Additionally, starting in the fall of 2015, Dentons lawyers will be presenting on behalf of the Public Contracting Institute a six-part series addressing the detailed compliance requirements and best practices relating to government contracts cybersecurity. More information about the series can be found here or by contacting the authors of this client alert.

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
Events from this Firm
24 Oct 2017, Seminar, Washington, DC, United States

The Dentons Forum for Women Executives invites you to join us for a luncheon featuring guest speaker Liza Mundy, journalist and author. Ms. Mundy recently released her latest book, Code Girls, the riveting untold story of more than 10,000 spirited young American women who cracked German and Japanese codes to help win World War II.

27 Oct 2017, Seminar, New York, United States

Please join us for a milestone event, our 10th annual CLE Seminar for In-House Counsel.

1 Nov 2017, Seminar, Washington, DC, United States

Celebrate the 58th anniversary of Dentons' Government Contracts practice

 
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.

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.