CMMC 2.0 Simplifies Requirements But Raises Risks For Government Contractors

• Published date: 09 December 2021
• Subject Matter: Government, Public Sector, Technology, Government Contracts, Procurement & PPP, Security
• Law Firm: Holland & Knight
• Author: Mr Shardul Desai, Eric S. Crusius and Kelsey M. Hayes

Highlights

• For the third time in five years, the U.S. Department of Defense (DOD) announced new, comprehensive cybersecurity standards for government contractors and subcontractors to ensure the protection of sensitive unclassified information.
• The Cybersecurity Maturity Model Certification (CMMC) 2.0 improves upon its earlier version by reducing the model to three cybersecurity levels, removing bespoke CMMC requirements and permitting self-assessments affirmations for Level 1 and part of a bifurcated Level 2.
• Self-assessments affirmations create substantial risks of future False Claims Act (FCA) U.S. Department of Justice (DOJ) investigations and qui tam suits, and this alert explains steps that can be taken to reduce such risks.

With the announcement of a revamped Cybersecurity Maturity Model Certification (known as CMMC 2.0),¹ for the third time in five years, the U.S. Department of Defense (DOD) announced new, comprehensive cybersecurity standards for government contractors and subcontractors to ensure the protection of sensitive unclassified information, that is, Federal Contract Information (FCI) and Controlled Unclassified Information (CUI). By referring to the new cybersecurity standard as CMMC 2.0, the DOD implicitly recognizes the likelihood of future versions at an unknown cost to the Defense Industrial Base (DIB).

Nevertheless, version 2.0, which was released after a seven-month review by the Biden Administration, reflects the DOD's assessment of the DIB's concerns and reflects the DOD's efforts to streamline and improve upon its earlier version after criticisms aimed at its cost and complexity. Specifically, CMMC 2.0 collapses CMMC 1.0's five tiers to three simplified tiers that are based on the cybersecurity framework implemented and that are devoid of additional CMMC-unique practices and processes. CMMC 2.0 also will allow "annual self-assessment with an annual affirmation by DIB company leadership" for Level 1 and part of the new bifurcated Level 2 (formerly Level 3). Otherwise, an independent third-party assessment or government-led assessment will be required.²

Besides CMMC 2.0, contractors with CUI are also required to comply with Defense Federal Acquisition Regulation Supplement (DFARS) 252.204-7019 and 252.204-7020. Collectively, these clauses require contractors to enter their compliance with the National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171 into DOD's Supplier Performance Risk System (SPRS). DOD will identify medium- and high-risk contracts and perform independent assessments of contractor compliance with NIST SP 800-171 and whether a contractor's compliance matches what it inputted into SPRS. Contractors should also be mindful as to whether these disclosures match their prior acceptance of contracts with DFARS 252.204-7012, which required full compliance with NIST SP 800-171.

The return of self-assessment, which was the bedrock of the first DOD cybersecurity standards set out in DFARS 252.204-7012 and whose failure led to the development of CMMC 1.0., creates substantial risks to DIB companies and their leadership. The U.S. Department of Justice (DOJ) recently announced a new Civil Cyber-Fraud Initiative that emphasized the use of the False Claims Act (FCA), 31 U.S.C. ' 3729 et. seq., to bring civil action against government contractors who knowingly misrepresented their cybersecurity practices and protocols.³ The FCA allows the government to recover treble damages and permits qui tam suits,⁴ which allow whistleblowers to receive a portion of the monies recovered by the government. In addition, other regulatory agencies have brought enforcement actions for alleged false certifications concerning compliance with agency-required cybersecurity standards.⁵ Thus, the risk of a DOJ investigation or a qui tam suit connected with a DIB company's self-assessment affirmation is very real, and this announcement - coupled with self-certification options in CMMC 2.0 - should...