Tag: Department of Defense

Report on the State of Competition within the Defense Industrial Base

Brian S. Gocial, Sara N. Gerber, and Tjasse L. Fritz

As the federal government prepares to roll out infrastructure grants and contracts in amounts not seen since the New Deal and the defense industrial base (“DIB”) gears up to support billions in new spending to support Ukraine, a new Department of Defense (“DoD”) report raises serious concerns about the state of competition within the DIB. The report recently released by the Office of the Under Secretary of Defense for Acquisition and Sustainment analyzes the state of competition within the DIB and concluded that it can be summarized in one word: poor. The report discusses the causes for the lack of competition and makes recommendations for improving the solicitation process to increase competition, inspire innovation, reduce prices, and improve quality.

Consolidation

Foremost among the causes for the lack of competition identified by the report is consolidation of the DIB. Of 51 aerospace and defense prime contractors in the 1990s only five exist today. Although the report failed to find significant correlation between this consolidation and increased pricing, the consolidation raises additional concerns for DoD, such as national security, mission risk, and strategic technology innovation. The report notes that “having only a single source or a small number of sources for a defense need can pose mission risk and, particularly in cases where the existing dominant supplier or suppliers are influenced by an adversary nation, pose significant national security risks.” The report recommends that when a merger is likely to harm one of these interests, DoD work closely with the Federal Trade Commission and Department of Justice to take structural or behavioral measures deemed necessary, up to and including blocking the merger.

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Beyond DOJ’s Blockbuster Year in FCA Recoveries, Whistleblower Activity and Investigations Continue

Elizabeth N. Jochum and Jennifer A. Short

Jennifer A. Short headshot image


The attention-grabbing headline from the Department of Justice’s (“DOJ”) annually released statistics on False Claims Act (“FCA”) settlements and judgments is that the government recovered more than $5.6 billion from FCA cases in fiscal year (“FY”) 2021. While this is the second largest annual recovery in FCA history and the largest since 2014, procurement fraud cases represented a substantially smaller percentage of the total recoveries than in years past. Healthcare resolutions dominated, accounting for more than five billion of the $5.6 billion in settlements and judgments. In previous years, healthcare matters have accounted for closer to two-thirds of the total recoveries, making last year’s outsized healthcare figure—driven by the blockbuster opioid settlements of late 2020[1]—an outlier.

Beyond the top-line dollar figures, the report shows that FCA activity continues at a healthy, if not fully robust, pace. The COVID-19 pandemic continues to impact qui tam filings; the number of new whistleblower suits dropped to 598 in FY 2021, a ten-year low. The number of DOJ-initiated matters remains higher than the near-term average, particularly in healthcare, but also in Department of Defense (“DOD”)-related cases. Contractors, healthcare providers, and others—especially those who received federal funding through pandemic aid programs—can anticipate that FCA investigations and resolutions will play out over the next several years.

Continue reading “Beyond DOJ’s Blockbuster Year in FCA Recoveries, Whistleblower Activity and Investigations Continue”

CMMC 2.0 Brings Much Needed Relief to the Defense Industrial Base

Michael J. Montalbano

In response to more than 850 public comments, the Department of Defense (“DOD”) has decided to significantly revamp the Cybersecurity Maturity Model Certification (“CMMC”) program. On November 4, 2021, DOD announced that it was replacing the current CMMC program with CMMC 2.0, which is expected to significantly reduce the regulatory burden on companies in the Defense Industrial Base (“DIB”). DOD made three significant changes through the new CMMC 2.0 program:

Reduces the number of CMMC levels. As we explained in earlier posts, CMMC 1.0 originally had five CMMC levels of ascending sophistication. CMMC 2.0 now only has three levels:

      • CMMC 2.0 Level One: This level will apply to most DIB companies and requires compliance with 17 basic cyber hygiene practices.
      • CMMC 2.0 Level Two: This level applies to DIB companies who will receive controlled unclassified information (“CUI”) and is expected to align with the requirements under NIST SP 800-171. Notably, DOD already requires most DIB companies receiving CUI to comply with NIST SP 800-171 through the cybersecurity DFARS clause 252.204-7012.
      • CMMC 2.0 Level Three: DOD is still developing the requirements for this level, but we expect that this level will apply to only the most sensitive and high-risk DOD projects.
Continue reading “CMMC 2.0 Brings Much Needed Relief to the Defense Industrial Base”

New Department of Defense Regulations Clarify Contractors’ Responsibilities to Comply with NIST SP 800-171 and CMMC Requirements

Robyn N. Burrows and Michael J. Montalbano

On September 29, 2020, the Department of Defense (“DoD”) issued a long-awaited, interim rule to strengthen cybersecurity protections throughout the Defense Industrial Base. The new rule establishes how DoD will assess contractors under current cybersecurity regulations set out by the National Institute of Standards and Technology Special Publication 800-171 (“NIST Requirements”) and the newly established Cybersecurity Maturity Model Certification (“CMMC”) program. The interim rule goes into effect on November 30, 2020; although, as we have discussed in earlier posts, DoD will gradually roll out the CMMC over the next five years.

NIST Self-Assessment Requirements

The first part of the new rule applies to contracts that incorporate DFARS 252.204-7012, which requires contractors and subcontractors that have access to covered defense information to comply with the NIST Requirements. Under the new rule, these entities will need to conduct a “Basic” self-assessment of their compliance with the NIST Requirements, and submit the results of that assessment to DoD through the Supplier Performance Risk System (“SPRS”). Contractors will need to update this self-assessment every three years or sooner if required by a contract. Starting November 30, 2020, contractors will not be eligible for new contracts (including task orders and delivery orders) or for options on existing contracts, unless the self-assessment score is posted on SPRS. DoD expects that it will take 30 days from submission to have the self-assessment score posted on SPRS, so it is important for contractors to submit their assessment at least 30 days prior to the November 30, 2020 implementation date. Continue reading “New Department of Defense Regulations Clarify Contractors’ Responsibilities to Comply with NIST SP 800-171 and CMMC Requirements”

Preparing for the Rollout of the Cybersecurity Maturity Model Certification: It Is All about the Timing

Michael Joseph Montalbano

The Department of Defense (“DoD”) is expected to begin rolling out the Cybersecurity Maturity Model Certification (“CMMC”) program later this year. As a brief refresher, the CMMC is a certification system implemented by DoD to protect Controlled Unclassified Information (“CUI”) and other sensitive contract information. There are five CMMC levels of ascending sophistication. The most common CMMC levels are expected to be Level 1 and Level 3. Level 1 will require contractors to put into place basic safeguarding practices to protect federal contract information. Level 3 will require contractors to put into place more stringent safeguarding practices that are designed to protect CUI. Contractors receive their CMMC after they pass an assessment by a CMMC Third Party Assessment Organization (“C3PAO”) or an individual assessor.

Although DoD will not fully implement the CMMC program until 2026, more and more contracts will require offerors to hold a CMMC demonstrating that their organizations have implemented the necessary cybersecurity controls. A nightmare scenario for any defense contractor is to find itself unable to compete for a lucrative DoD contract due to insufficient time to obtain the required CMMC before proposal deadlines. Fortunately, the Accreditation Body (“AB”) that is responsible for rolling out the CMMC program has provided estimated timelines for contractors seeking a CMMC. Continue reading “Preparing for the Rollout of the Cybersecurity Maturity Model Certification: It Is All about the Timing”

Part B Interim Rule Bans Contractors from Using Covered Technology Starting August 13th: 5 Steps for Meeting the Compliance Deadline

Justin A. Chiarodo, Merle M. DeLancey, Jr., and Robyn N. Burrows

 

We previously discussed key elements of the newly released interim rule (“the interim rule” or “the rule”) implementing Part B of Section 889 (“Part B”), which prohibits the federal government from contracting with entities that use certain Chinese telecommunications equipment. This post provides a more detailed analysis of the scope and application of the rule, as well as five compliance recommendations given the impending August 13th deadline.

Rule Applies to All Contracts Effective August 13, 2020

Part B applies to all solicitations, options, and modifications on or after August 13th, including contracts for commercial items, commercially available off-the-shelf (COTS) items, and contracts at or below both the micro-purchase and simplified acquisition thresholds. Like it did with respect to Part A, GSA intends to issue a Mass Modification requiring contractors to certify compliance with Part B. GSA has also released Q&As and FAQs to assist contractors with Part B implementation. The interim rule acknowledges that Part B will have a broad impact across contractors in a range of industries, including healthcare, education, automotive, aviation, and aerospace. The rule, however, does not apply to federal grant recipients (which are subject to a separate rulemaking). Continue reading “Part B Interim Rule Bans Contractors from Using Covered Technology Starting August 13th: 5 Steps for Meeting the Compliance Deadline”

CARES Act: Significant Funds for Defense Department and Defense Contractors

Adam Proujansky

The recently enacted coronavirus COVID-19 Coronavirus Aid, Relief, and Economic Security Act stimulus package (the “CARES Act” or “the Act”) includes billions of dollars earmarked for the Department of Defense (“DoD”) and defense industry contractors. It does this in two ways:

    1. By providing billions of dollars in loans, loan guarantees, and other financial assistance to businesses through the Department of the Treasury, including up to $17 billion specifically for businesses “critical to maintaining national security;” and
    2. By providing $10.5 billion in supplemental appropriations to DoD, much of which is likely to go to procuring goods and services from federal contractors, including in areas ranging from healthcare to information technology. The Act also contains provisions intended to streamline DoD contracting during the present emergency.

Although the procedures to obtain these loans were not established by the Act, the Secretary of the Treasury is required to publish procedures for applying for these loans within 10 days of enactment. It is expected that DoD will issue solicitations very soon to meet these pressing needs. We expect many contractors in the defense industry will be eligible for these loans, or for the parallel loan program for small businesses being administered by the Small Business Administration under the Act. Continue reading “CARES Act: Significant Funds for Defense Department and Defense Contractors”

New DoD Cybersecurity Regulations Are Coming—Is Your Company Ready?

Michael Joseph Montalbano

In January, the Department of Defense (“DoD”) released more information on its much-anticipated Cybersecurity Maturity Model Certification (“CMMC”) framework. While a final rule is not expected until the fall, contractors need to begin preparing now so they do not miss out on DoD contract opportunities.

What Is the CMMC?

The CMMC is a certification system that all DoD prime and subcontractors must comply with to be eligible to compete for and perform future DoD contracts. Under the new CMMC requirements, an accreditation body tapped by DoD will begin training third-party assessors in the spring of 2020, who will in turn certify defense contractors under the CMMC. There will be five CMMC certification levels, of ascending sophistication:

    • Level 1 – Basic Cyber Hygiene
    • Level 2 – Intermediate Cyber Hygiene
    • Level 3 – Good Cyber Hygiene
    • Level 4 – Proactive
    • Level 5 – Advanced / Progressive

The contractor must comply with a combination of the following cybersecurity safeguards, depending on the certification level a contractor wants to achieve: (1) FAR 52.204 (Basic Safeguarding of Covered Contractor Information Systems); (2) NIST Special Publication 800-171 Revision 1 (“NIST Requirements”); (3) select subsets of a supplement to the NIST Requirements called NIST SP 800-171B; and (4) up to 171 “practices” identified in the CMMC. Though this may sound like a lot for contractors to process, DoD has released helpful appendices that put many of the requirements in easy-to-understand terms. Continue reading “New DoD Cybersecurity Regulations Are Coming—Is Your Company Ready?”

A DoD New Year’s Resolution: No More Chinese (and Possibly Russian) Products and Services in Support of Key Missions

Justin A. Chiarodo and Robyn N. Burrows

A very Happy New Year to our GovCon Navigator readers! Further expanding recent supply chain restrictions across federal procurement, the Department of Defense (“DoD”) issued an interim rule prohibiting DoD from procuring equipment or services from certain Chinese entities (and possibly Russian) if used to carry out DoD nuclear deterrence or homeland defense missions. The rule builds on the Section 889 supply chain restrictions we previously covered in a prior blog post.

What should contractors do now given the interim rule is already in effect? Contractors should first evaluate their existing contract portfolios for covered missions and take immediate steps to eliminate all covered products from their supply chain (and find alternate sources of supply). If the rule might impact contract performance, you should be prepared to address this with the appropriate counterparty. And given the requirement for compliance certifications that mirror Section 889, contractors should also harmonize monitoring and compliance with their existing supply chain compliance programs. Among other things, this should address the requirement to obtain compliance certifications from downstream subcontractors and suppliers.

Read on for the specifics.

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Defense Health Agency and Defense Logistics Agency Memorandum of Agreement: A Good First Step, but What about Coordination with the Department of Veterans Affairs?

Merle M. DeLancey Jr.

On August 15, 2019, the Defense Health Agency (“DHA”) and Defense Logistics Agency (“DLA”) agreed upon a joint approach to healthcare logistics. Under the Memorandum of Agreement (“MOA”), DLA will be responsible for materiel acquisitions, while DHA will take the lead on medical services acquisitions. The MOA clarifies the agencies’ complementary roles and responsibilities and avoids duplication of effort. The MOA covers all aspects of medical logistics support provided by DLA to DHA, and DHA’s consideration for that support in performance areas including pharmaceuticals, medical-surgical supplies, healthcare technology equipment, cataloging, and Class VIII surge and sustainment materiel required by the services to meet the demands of the national military support strategy.

The uninformed might question the need for DHA and DLA to formally enter into a MOA. After all, DHA and DLA are both under the Department of Defense (‘DoD”) umbrella. Why is an agreement required to coordinate the two agencies’ efforts? Why wasn’t such coordination and avoidance of duplication of effort simply ordered by DoD senior command? Good questions perhaps, but the MOA was necessary to ensure the agencies stay in their respective lanes. Continue reading “Defense Health Agency and Defense Logistics Agency Memorandum of Agreement: A Good First Step, but What about Coordination with the Department of Veterans Affairs?”