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As the Department of Defense (DoD) pushes to overhaul cybersecurity requirements with a new Cybersecurity Maturity Model Certification (CMMC) program to be implemented in the fall of 2020, I recently provided insights for an article in Law360 that highlighted some potential challenges the quick rollout and still-unanswered questions could present. Contractors generally welcome the unified and modernized approach to cybersecurity, but because there are many questions left unanswered since the initial drafts released in May and in September, there are concerns among some that the perceived rush is creating undue stress and confusion.

As a result, the September draft of the CMMC program received a large volume of public comments, which Todd noted was unusual given the limited time available for comment. For solutions the DOD could address in the final rule, I suggested the Department ensure minimum cybersecurity levels are included in contracts as pass-fail threshold requirements, rather than as subjective assessments that potentially open up new grounds for bid protests.

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Given the continued high volume of mergers and acquisitions (M&A) transactions in the federal marketplace, buyers and sellers need to be aware of the developing body of case law at Government Accountability Office (GAO) and Court of Federal Claims (COFC) regarding how acquisitions are impacting pending bids and the steps that parties can take to protect those bids in certain situations.

This post will highlight recent cases and provide practical guidance on diligence, deal timing and communications with government customers regarding transactions. Additionally, this post will outline bid protest decisions involving asset deals and corporate reorganizations, and their impact on pending bids.

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A recent decision by the U.S. Court of Federal Claims in Bitmanagement Software GMBH vs. The United States determined the United States was not liable for copyright infringement because, based on the interactions between the parties, the Navy was authorized to copy Bitmanagement’s software on 350,000 computers. Bitmanagement is a German company that develops software for rendering three-dimensional graphics and one of their primary products is a three-dimensional renderer named BS Contact Geo.

Background: Floating Software Licenses Led to Copyright Infringement Allegations

In 2006, the Navy was developing a software application called SPIDERS 3D that provides a virtual reality environment for engineers and technicians to view and optimize configurations of Navy installations. During the development of this application, the Navy realized a need for the inclusion of a three-dimensional visualization software within SPIDERS 3D. To fill this need, the Navy procured BS Contact Geo on three separate occasions in 2006, 2008 and 2012 through a software reseller, Planet 9, who Bitmanagement used to market and sell Bitmanagement’s products in the United States.

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As we noted in a blog post in December 2016, “LPTA Out, Fixed Price Contracts In,” the Department of Defense (DoD) has been moving to restrict the Lowest Price Technically Acceptable (LPTA) evaluation methodology, which requires award to the lowest-price offeror that meets the minimum requirements regardless of whether more expensive solutions are optimal.  Further, in 2016 legislation went into effect requiring that limitations on the use of LPTA evaluations be codified in the Defense Federal Acquisition Regulation Supplement (DFARS).

New Restrictions on LPTA Evaluations

On September 26, 2019, DoD issued a final rule that amends the DFARS to implement that legislation.  The new rule, which was mandated by Section 813 of the National Defense Authorization Act (NDAA) for 2017, as amended by section 822 of the NDAA for 2018, establishes that the LPTA evaluation methodology shall only be used when the following conditions are met:…
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A major shift in cybersecurity requirements for Department of Defense (DoD) contractors is about to come into effect—earlier this month the DoD released for public comment the long-anticipated Version 0.4 of the draft Cybersecurity Maturity Model Certification (CMMC). This new framework to safeguarding controlled unclassified information (CUI), which includes a certification requirement by a third-party auditor, presents both significant opportunities and challenges for DoD contractors.

In an overview briefing on the new model, DoD emphasized that the new framework will impose a unified cybersecurity standard for all DoD acquisitions and, in so doing, “reduce exfiltration of [CUI] from the Defense Industrial base.” To achieve this goal, the new model significantly bolsters the existing compliance regime around cybersecurity—which currently, for the most part, requires compliance with the security standards set forth in NIST SP 800-171 through DFARS 252.204-7012.

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A recent decision in Sotera Defense Solutions, Inc. v. Department of Agriculture, CBCA 6029, 6030, by the United States Civilian Board of Contract Appeals (CBCA), upheld a contract provision that imposed greater obligations on the government than required by the Service Contract Act (SCA). The validity of this contract provision ultimately proved dispositive in the outcome of the case with the CBCA holding the government liable for costs.

In 2012, the National Institutes of Health (NIH) awarded Sotera a contract for the provision of information technology (IT) services. The contract stated that the positions in the contract were exempt from the SCA but advised that a contracting officer would have to determine whether the SCA applied to any positions requested within the task order. The Department of Agriculture (USDA) issued three task orders against the NIH contract to Sotera in which the USDA sought IT operations and maintenance support for offices located throughout the United States.

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I am excited to be presenting a training seminar titled, “Trends and Changes in Federal Contracting FY 20” for the Florida Procurement Technical Assistance Center (Florida PTAC).

The interactive seminar will provide insight into the world of federal government contracting for Fiscal Year 2020 and new initiatives that will impact federal businesses in the next 12 months.

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In an article published by Law360, we examined a report issued by the U.S. Department of Defense (DoD) Inspector General on July 23, which summarizes the findings of an audit into the protection of controlled unclassified information (CUI) on contractor networks.

The DoD reviewed nine contractors’ information systems and revealed some deficiencies that do not meet the standards set forth in National Institute of Standards and Technology (NIST) Special Publication 800-171. The exposed deficiencies include: not mitigating vulnerabilities on their networks and systems, not scanning their network for vulnerabilities, not mitigating high vulnerabilities identified in the contractor’s management programs and more.

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The Department of Defense (DoD) Inspector General recently issued a report summarizing the findings of an audit into the protection of Controlled Unclassified Information (CUI) on contractor networks.  Based on an in-depth review into nine contractors, the audit uncovered some common practices that fall short of meeting the standards set forth in NIST SP 800-171, which contractors are obligated to follow under DFARS 252.204-7012.

Shortcomings Discovered in DoD Audit

These common lapses include the following, among others:

  • Inconsistent tracking of cybersecurity threats
  • Failure to consistently mitigate network vulnerabilities
  • Uneven use of strong passwords
  • Inconsistent use of multifactor identification

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