United States: Next Steps In Cybersecurity Under President Trump

On May 11, 2017, President Donald Trump signed an executive order titled "Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure." The executive order triggers a cyber policy review across critical infrastructure sectors (communications, defense industrial base, financial, information technology, electric, transportation, health care and others), as well as a focus on the federal government securing its own systems. This review process, by definition, creates risks and opportunities for critical infrastructure companies. The focus on the government's own systems also presents a clear opportunity for companies who can respond to the order's stated preference for shared IT services and consolidated network architecture in the federal government.

The executive order triggers no less than 19 reports, covering a full range of topics affecting cybersecurity stakeholders, including private companies, universities, federal agencies and other governments. While it is not clear how the 19 reports will be coordinated — or rationalized, given that different agencies and constituencies will no doubt have different priorities, approaches and policy directions — stakeholders would be wise to take the reports seriously, and to recognize that the clock has started in the race to influence them.

This article is organized by each of the order's three substantive sections. First, it distills what each section says. Then it provides analysis of the section's key implications for industry.

Section 1: The Cybersecurity of Federal Networks

Section 11 begins with a finding that "antiquated" information technology is "difficult to defend."2 It adds that "known but unmitigated vulnerabilities," such as "using operating systems or hardware beyond the vendor's support lifecycle, declining to implement a vendor's security patch, or failing to execute security-specific configuration guidance," are "among the highest cybersecurity risks" that the government faces.

To solve these problems, the section observes that the government must plan such that "maintenance, improvements, and modernization" of federal IT "occur in a coordinated way and with appropriate regularity," in addition to "protecting IT and data currently in place." This planning requires "information sharing," and agency heads "lead[ing] integrated teams of senior executives with expertise in IT, security, budgeting, acquisition, law, privacy, and human resources."

These ideas will be implemented through two mechanisms. First, the executive branch will manage cybersecurity risk as a governmentwide enterprise "because risk management decisions made by [individual] agency heads can affect the risk to the executive branch as a whole." Second, the president will hold individual agency heads accountable for: (1) "implementing risk management measures commensurate with the risk and magnitude of the harm that would result from unauthorized access, use, disclosure, disruption, modification, or destruction of IT and data" at their agencies; and (2) "ensuring that cybersecurity risk management processes are aligned with strategic, operational, and budgetary planning processes."

The following are key workflows prescribed by the section:

Procurement Preference for Shared IT Services

Effective immediately, the executive order enshrines a policy preference for "shared IT services" in procurement. By Aug. 9, 2017 (90 days from May 11, 2017), the secretary of homeland security, administrator of general services, and directors of the Office of Management and Budget and the American Technology Council3 are to submit a report to the president assessing the "technical feasibility and cost effectiveness" of transitioning all or some federal agencies to "one or more consolidated network architectures"4 and "shared IT services, including email, cloud, and cybersecurity services." The report is also to consider consistency and compliance with policies and practices issued pursuant to the Federal Information Security Management Act, 44 U.S.C. § 3553, and Section 227 of the Homeland Security Act, 6 U.S.C. § 148, in undertaking the transition.

The procurement preference, and polices to be assessed by the report, represent a potentially huge opportunity for industry players equipped to assist with federal IT modernization.5 Nominally, a "cloud-first" policy has been favored since 2010. However, despite notable contract awards, such as the U.S. Department of Interior's 2012 contract with Google for departmentwide collaboration and cloud email services and the Central Intelligence Agency's 2013 contract with Amazon Web Services to build and implement a cloud computing platform, the "cloud-first" policy has been hamstrung by delays in authorizations for cloud offerings through the Federal Risk and Authorization Management Program.6 To the extent the administration eases FedRAMP bottlenecks, an advantage of the shared IT services preference could be the eventual development of a single federal network infrastructure — at least for civilian agencies — with standardized defenses, minimized access points, and encryption layered over the cloud.7 All of this would likely be built in partnership with industry.

Additionally, recent large-scale cyberattacks have often taken advantage of security glitches in outdated software. The executive order's emphasis on using more up-to-date versions of software, with current security patch support, should benefit existing software vendors. Due to the realities of an embedded base of systems, a move from lower value, "last generation" software to higher value, current versions would likely provide an opportunity for incumbent vendors to move federal customers to next generation systems.

It is not yet clear how the various Section 1 reports will be coordinated, or rationalized into a unified executive branch strategy.8 It will therefore be difficult for companies to predict the implications of the IT modernization process upon any particular procuring agency before future solicitations are issued.9 For this reason, industry stakeholders should be sure to engage throughout the reporting process to ensure that their core principles and care-abouts are reflected in the end results.

Risk Management Assessment and NIST Framework Implementation

The executive order also recognizes that modernizing federal IT is only part of the cybersecurity equation. The order therefore looks at the cybersecurity "risk mitigation and acceptance choices" each agency will need to make. It builds on prior Obama administration policy by requiring, effective immediately, that agencies manage their risk mitigation and acceptance choices using "The Framework for Improving Critical Infrastructure Cybersecurity" previously developed by the National Institute of Standards and Technology pursuant to Section 7 of Executive Order 13636 (Feb. 12, 2013). It requires each agency head to provide a "risk management report" to the secretary of homeland security and the director of OMB by Aug. 9, 2017 (90 days from May 11, 2017) who, in turn, will provide a meta report to the president by Oct. 8, 2017 (60 days from Aug. 9, 2017). The meta report is to address, among other things, "the risk mitigation and acceptance choices set forth in the [individual agency] reports" and a plan to "clarify, reconcile, and reissue, as necessary and to the extent permitted by law, all policies standards, and guidelines issued by any agency" in furtherance of FISMA, 44 U.S.C. § 3551 et seq., and to align those policies, standards, and guidelines with the NIST framework.

This focus on "risk mitigation and acceptance choices" builds on the principle that, even for known or anticipatable vulnerabilities, the cost of implementing a solution may outweigh the potential risk or vulnerability to be addressed. Under the executive order, agency heads will be expected to unsilo IT decisions from overall strategic budgeting, acquisition, operations, and security decisions, and will be accountable for the choices they make in doing so.[[NL:At least one observer has noted that this accountability will likely incentivize the filling of open agency CIO positions. See id.]] In addition to agency-level accountability, the order also contemplates managing cybersecurity risk as a governmentwide enterprise, including by clarifying, reconciling and reissuing FISMA regulations "as necessary" to implement the NIST framework, and by rationalizing the "risk mitigation and acceptance choices" of each agency into a coherent governmentwide strategy. While this would be salutary, it may prove difficult as even standardizing the approach to IT within a single agency can lead to large turf wars.10 Moreover, the fragmented reporting process initiated by the order may, by its design, frustrate the creation of a unified strategy.

Section 2: The Cybersecurity of Critical Infrastructure

Section 2 of the executive order proclaims it is "the policy of the executive branch to use its authorities and capabilities to support the cybersecurity risk management efforts of the owners and operators of the Nation's critical infrastructure."11 To implement this policy, the section prescribes the following key workflows:

Protection and Risk Management of Section 9 Entities and the Electric Subsector

The secretaries of homeland security and defense, the attorney general, the directors of national intelligence and the Federal Bureau of Investigation, the "heads of appropriate sector-specific agencies,"12 and "all other appropriate agency heads, as identified by the Secretary of Homeland Security," are to "engage" with and "solicit input" from Section 9 entities.13 By Nove. 7, 2017 (180 days from May 11, 2017), the agency heads shall provide a report to the president "identify[ing] authorities and capabilities that agencies could employ to support the cybersecurity efforts" of Section 9 entities, and "evaluat[ing] whether and how" these authorities and capabilities "might be employed to support cybersecurity risk management efforts" as well as "any obstacles to doing so." The agency heads shall also provide an annual report to the president with updated findings and recommendations.

As noted, the Nov. 7 report specifically anticipates that the designated agency heads shall "engage" with and "solicit input" from Section 9 entities. In crafting their engagement strategies for this report, the owners of the Section 9 entities should be mindful that the report will be updated annually. As a result, engagement with the reporting agency heads will likely become a continuous, ongoing relationship.

Promotion of Market Transparency of Risk Management Practices and Collaboration to Reduce Threats

The secretaries of homeland security and commerce shall provide a report to the president by Aug. 9, 2017 (90 days from May 11, 2017) "that examines the sufficiency of existing Federal policies and practices to promote appropriate market transparency of cybersecurity risk management practices by critical infrastructure entities, with a focus on publicly traded critical infrastructure entities." Additionally, the secretaries of homeland security and commerce — in consultation with the secretary of defense, the attorney general, the director of the FBI, the heads of sector-specific agencies, and the chairs of the Federal Communications Commission and Federal Trade Commission — shall "identify and promote action by appropriate stakeholders to improve the resilience of the internet and communications ecosystem and to encourage collaboration with the goal of dramatically reducing threats perpetrated by automated and distributed attacks (e.g., botnets)."[[N:"Appropriate stakeholders" refers to "any non-executive branch person or entity that elects to participate in [the] open and transparent process" established by the Secretaries of Homeland Security and Commerce pursuant to the Executive Order.]] They shall make a "preliminary report" publicly available by Jan. 6, 2018 (240 days from May 11, 2017) and provide a "final report" to the president by May 11, 2018 (one year from May 11, 2017).

These two reports stand out as among those most likely to be of interest to industry in the entire executive order. This is because they highlight an important tension. On the one hand, private industry (particularly entities that are not Section 9 or otherwise critical infrastructure) may understandably be uncomfortable with government-directed efforts to promote transparency and collaboration, especially to the extent such efforts devolve into public shaming or significant reporting mandates. On the other hand, there are important countervailing considerations emanating from the inherent interconnectedness of the internet and networked systems. For example, the user of one network (e.g., an employee's internet-connected workstation) may choose to use the same log-in credentials for another network (e.g., the employee's personal online banking portal). Because of this correlation tendency, the network security practices of one entity can substantially affect the network security of other entities. This is especially so in the case of botnets that leverage multiple networks at a time in their attacks. Likewise, the breach of a network providing application programming interfaces (e.g., an online payments processor or a provider of embedded maps), could compromise other networks reliant on those APIs (e.g., a business accepting online payments or a comprehensive tool embedding real-time maps). In crafting their engagement strategies, companies falling within the ambit of the two reports will want to be mindful of these tensions. Specifically, they might seek to emphasize a preference for voluntary, rather than coercive, regulation to increase industry sharing of threats and other relevant cyber information with each other and the government.14

Mitigation of Risks to the Defense Industrial Base

Finally, by Aug. 9, 2017 (90 days from May 11, 2017), the secretaries of homeland security and defense, and the directors of national intelligence and the FBI, shall provide a report to the president on "cybersecurity risks facing the defense industrial base, including its supply chain, and United States military platforms, systems, networks, and capabilities," as well as "recommendations for mitigating these risks." This assessment will be of obvious interest to industry, and should also be a focus of engagement.

The tension for industry will be between the opportunity for increased federal investment in industrial base IT and the risk of agencies imposing significant reporting mandates on companies for even the smallest of cyber incidents,15 noncompliance with which could be a predicate for suspension, debarment or civil False Claims Act liability. This is particularly worrisome for commercial companies engaging in only a limited number of government contracts — for example, a vendor to the Defense Logistics Agency — as a cyber incident on a nonsegregated commercial system could conceivably trigger reporting obligations, and resultant liability, if the contractor also stores, transmits, or processes government information on the system.16

Likewise, industry may want to pay closer attention to the treatment of cyber incidents in Contractor Performance Assessment Reports System (CPARS) assessments. To the extent the executive order succeeds in imposing agency-level accountability for cyberrisk management practices, IT contractors could be exposed to CPARS-documented blame or criticism in the event of cyber incidents occurring on architecture the contractor sold, installed, or managed. As the government push for IT modernization progresses, industry might consider pursuing regulatory or statutory safeguards for contractors challenging what they perceive as unwarranted, adverse CPARS assessments arising out of cyber incidents.

Section 3: Cybersecurity for the Nation

Section 3 of the Executive Order proclaims it is "the policy of the executive branch" (a) "to promote an open, interoperable, reliable, and secure internet that fosters efficiency, innovation, communication, and economic prosperity, while respecting privacy and guarding against disruption, fraud, and theft"; and (b) "to support the growth and sustainment of a workforce that is skilled in cybersecurity and related fields." Like Section 2, Section 3 focuses on the creation of a series of reports. Here, the reports concern the promotion of a secure, internationally connected internet and the growth of a sufficient cybersecurity-trained domestic workforce within the United States.

Industry will want to pay particular attention to a joint report from the secretaries of homeland security, defense, state, treasury and commerce, the attorney general, the director of national intelligence, and the U.S. Trade Representative, due to the president Aug. 9, 2017 (90 days from May 11, 2017), on "the Nation's strategic options for deterring adversaries and better protecting the American people from cyber threats." This report could include recommendations for additional federal spending on new cybersecurity programs.

Additionally, industry should pay attention to a report from the secretaries of homeland security, defense, commerce, labor and education, the director of the Office of Personnel Management, and the heads of "other agencies identified jointly" by the secretaries of homeland security and commerce, which is intended "to ensure that the United States maintains a long-term cybersecurity advantage." After "jointly assess[ing] the scope and sufficiency of efforts to educate and train the American cybersecurity workforce of the future, including cybersecurity-related education curricula, training, and apprenticeship programs, from primary through higher education," the agency heads shall provide a report to the president by Sept. 8, 2017 (120 days from May 11, 2017) "with findings and recommendations regarding how to support the growth and sustainment of the Nation's cybersecurity workforce in both the public and private sectors." This report might include recommendations for incentives or subsidies to industry to invest in cybersecurity-related human capital.

Finally, one piece which seems to be missing from Section 3 is any mention of building global cyber "norms." Although there is discussion of "strategic options for deterring adversaries" and "investigation, attribution, cyber threat information sharing ... capacity building, and cooperation," a point of focus for recent past administrations has been building out "rules of the road" as to what is okay and not okay for state actors (or private actors with state blessing) to do in cyberspace or by cyber means. American industry may have an interest in the creation and solidification of such norms and, if so, may want to engage on this front.

Conclusion

It is worth taking a momentary step back to consider the bigger cybersecurity picture for federal systems. On May 17, 2017, the Modernizing Government Technology (MGT) Act introduced by Rep. Will Hurd, R-Texas, H.R. 2227, passed the House of Representatives with bipartisan support, including the support of House Majority Leader Kevin McCarthy, R-Calif. The MGT Act would create a General Services Administration-managed "Technology Modernization Fund" from which federal agencies could borrow to pay for upgrading outdated IT, subject to approval by an MGT Act-established board.17 The president's proposed budget for fiscal year 2018, released less than a week later on May 23, 2017, requested $228 million in appropriations for the envisioned Technology Modernization Fund.18

In tandem with passage of the MGT Act and adequate funding for the Technology Modernization Fund, the executive order undoubtedly moves federal cybersecurity in the right direction. That said, it is important to emphasize that the order is just one piece in a rapidly evolving federal cybersecurity landscape. A key for industry today will be to devise overarching engagement strategies of core principles and care-abouts to inform each of the 19 reports across the executive branch, as well as relevant actors within Congress. Another key will be to optimize product and service offerings to match the stated procurement preference for shared IT services and consolidated network architecture.

Industry will also want to exercise vigilance that government efforts toward increased transparency, and mitigating risks to critical infrastructure entities and the defense industrial base, do not result in onerous new reporting requirements, particularly for companies that are largely commercial. Finally, industry should prepare for and attempt to shape the publicly available report concerning collaboration against common threats before it is issued.

Originally published by Law360.

Footnotes

1. For "National Security Systems," as defined in the Federal Information Security Modernization Act of 2014 (FISMA), 44 U.S.C. § 3552(b)(6), Section 1 workflows shall be implemented by the Secretary of Defense and the Director of National Intelligence, in place of the Secretary of Homeland Security and the Director of OMB, "to the maximum extent feasible and appropriate."

2. "Information technology" is defined at 40 U.S.C. § 11101(6). For purposes of the Executive Order, the codified definition is expanded to include "hardware and software systems of agencies that monitor and control physical equipment and processes."

3. The American Technology Council was created by Executive Order 13794 (Apr. 28, 2017). Media reports have stated that it is a unit within the White House Office of American Innovation. See, e.g., The White House will meet with tech execs for advice on giving the government a digital upgrade, Recode (May 19, 2017), http://bit.ly/2qNkzVl (last visited May 24, 2017). That Office, helmed by President Trump's son-in-law Jared Kushner, was itself created by a recent Presidential Memorandum dated March 27, 2017. The Memorandum has not yet been numbered.

4. "IT architecture" refers to "the integration and implementation of IT within an agency." "Network architecture" refers to "the elements of IT architecture that enable or facilitate communications between two or more IT assets."

5. The shared services preference also might dovetail with recent Office of Federal Procurement Policy (OFPP) efforts to implement category management principles in federal procurement more generally. See Proposed New Office of Management and Budget Circular No. A-XXX, "Implementing Category Management for Common Goods and Services," 81 Fed. Reg. 69,860 (Oct. 7, 2016).

6. See How New Cyber Executive Order Could Change Federal IT, GovTechWorks (May 17, 2017), http://bit.ly/2qgemlQ (last visited May 25, 2017).

7. Id.

8. The unifying center of IT modernization and preference for shared IT services may prove to be the White House Office of American Innovation, helmed by President Trump's son-in-law Jared Kushner, or that Office's American Technology Council. The Council hosted a meeting with private sector technology leaders on June 19, 2017, which included the Chairs or CEOs of Adobe Systems, Alphabet (corporate parent of Google), Amazon, Apple, IBM, Intel, Microsoft, Oracle, and Qualcomm, as well as venture capital firm Kleiner Perkins, the Massachusetts Institute of Technology, and The Ohio State University. Among other things, the Council discussed Government estimates that IT modernization, centralization of IT spend, and consolidation of IT data centers could save as much as $1 trillion over ten years. The Council also discussed a proposal by Amazon CEO Jeff Bezos to make greater use of commercially available technologies. These and other proposals could have a far-reaching influence on IT procurement practices if adopted. See Tech CEOs meet with Trump on government overhaul, Reuters (June 19, 2017), http://reut.rs/2sOT7rY (last visited June 22, 2017).

9. See Trump's cyber order excites government contractors, Bloomberg Gov't (May 17, 2017), http://bit.ly/2rZcudP (last visited May 25, 2017).

10. See How New Cyber Executive Order Could Change Federal IT, GovTechWorks (May 17, 2017), supra.

11. "Critical infrastructure" is defined as "systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems and assets would have a debilitating impact on security, national economic security, national public health or safety, or any combination of those matters." USA Patriot Act, 42 U.S.C. § 5195c(e).

12. "Sector-specific agencies" are defined and specified in Presidential Policy Directive 21 (Feb. 12, 2013).

13. "Section 9 Entities" refers to the critical infrastructure entities previously identified by Section 9 of Executive Order 13636 (Feb. 12, 2013) "to be at the greatest risk of attacks that could reasonably result in catastrophic regional or national effects on public health or safety, economic security, or national security."

14. A related question is whether industry should encourage the development of a "bug bounty" program, modeled on those used in the private sector, in which awards would be made to individuals who discover cybersecurity glitches in federal or Section 9 Entity networks. See, e.g., Trump's cyber order excites government contractors, Bloomberg Gov't (May 17, 2017), supra. This topic may be raised by appropriate stakeholders when engaging in the two reports, or by private sector technology leaders in meetings of the American Technology Council. Indeed, it has been reported that, at the June 19, 2017 meeting, the White House expressed an interest in learning from private sector IT security and fraud reduction practices, such as those engaged in by credit card companies. See, e.g., Tech CEOs meet with Trump on government overhaul, Reuters (June 19, 2017), supra. Were the government to adopt a bug bounty or other "crowd sourced" program, an effort would need to be made by OFPP and the FAR Council, among others, to square the program with pre-existing principles of procurement and appropriations law. Likewise, regulations and, ultimately, caselaw would need to be developed regarding who is eligible to receive a bounty. Such regulations or caselaw might borrow from the body of caselaw concerning the eligibility of qui tam relators in the context of recoveries under the civil False Claims Act, 31 U.S.C. § 3729(a).

15. "Cyber incident" and "significant cyber incident" are defined in Presidential Policy Directive 41 (July 26, 2016).

16. For example, Department of Defense contractors already are subject to a DFARS clause requiring them: (a) to safeguard "covered defense information," including by implementing NIST Special Publication 800-171; and (b) to "rapidly report" the "discovery of any cyber incident." See 48 C.F.R. §§ 252.204-7008, 252.204-7012. NIST Special Publication 800-171 is available at http://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.800-171.pdf (last visited May 25, 2017). The scopes of "covered defense information" and "cyber incident" are somewhat uncertain but potentially quite broad. Depending on how these terms are interpreted by the Department, and civilian contracting agencies in the event of subsequent analogue provisions in the FAR, potentially significant compliance obligations and attendant liability for non-compliance could ensue.

17. See House Passes IT Modernization Bill, Nextgov (May 17, 2017), http://bit.ly/2ruUiYY (last visited May 25, 2017). Agencies would theoretically pay back the fund with savings resulting from the upgrades. While not provided for in the proposed MGT Act legislation, there is a future potential for the role of the Technology Modernization Fund to be expanded to provide loans and/or grants to states and municipalities for IT upgrades, as well as to the owners of Section 9 Entities. Senator Jerry Moran (R-Kan.) has introduced a companion bill in the Senate, S. 990, that presently is pending before the Committee on Homeland Security and Governmental Affairs.

18. See Trump Budget Creates $228M Technology Modernization Fund, Nextgov (May 23, 2017), http://bit.ly/2qkRnSz (last visited May 25, 2017).

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Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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