Government contractors have a wide range of unique challenges, not the least of which is data security. A good example is the interim rule the Department of Defense (DoD) issued last month that implements sections of the National Defense Authorization Act for Fiscal Years 2013 and 2015. In short, these provisions expand the incident reporting requirements for contractors and increase the security requirements for cloud service providers.

The Secretary of Defense determined that “urgent and compelling” reasons exist to issue the interim rule without prior opportunity for public comment. There is an urgent need to protect covered defense information and to increase awareness of the full scope of cyber incidents being committed against defense contractors. The use of cloud computing has greatly increased, according to the Secretary, and has increased the vulnerability of DoD information. The recent high-profile breaches of Federal information also influenced this determination. It is easy to see how similar considerations will influence other federal and state agencies to tighten their data security requirements on their contractors and subcontractors.

The hope here is that the rule will increase the cyber security on DoD information on contractor systems, help to mitigate risk, and gather information for the development of future improvements in cyber security. Note that the DoD will consider public comments to the interim rule before issuing the final rule. Comments must be submitted on or before October 26, 2015 to be considered.

Incident Reporting Highlights

• Contractors and subcontractors must report cyber incidents that result in an actual or potentially adverse effect on a covered contractor information system or covered defense information residing on that system, or on a contractor’s ability to provide operationally critical support.

• A “cyber incident” means actions taken through the use of computer networks that result in a compromise or an actual or potentially adverse effect on an information system and/or the information residing therein. A “compromise” is the disclosure of information to unauthorized persons, or a violation of the security policy of a system, in which unauthorized intentional or unintentional disclosure, modification, destruction, or loss of an object, or the copying of information to unauthorized media may have occurred.

• Rapid reporting is required – this means 72 hours of discovery of a cyber incident.

• The DoD recognizes that the reporting may include the contractor’s proprietary information, and will protect against the unauthorized use or release of that information.

• The reporting of a cyber incident will not, by itself, be interpreted as evidence that the contractor or subcontractor has failed to adequately safeguard covered defense information.

Cloud Computing Highlights

• Contracts for cloud computing services may be awarded only to providers that have been granted provisional authorization by Defense Information Systems Agency, at the appropriate level.

• Cloud computing service providers must maintain government data within the 50 states, the District of Columbia, or outlying areas of the United States, unless physically located on DoD premises. Government data can be maintained outside the U.S. upon written notification from the contracting officer.

• Government data means any information, document, media, or machine readable material regardless of physical form or characteristics, that is created or obtained by the government in the course of official government business.

• Purchase requests for cloud computing service must, among other things, describe government data and the requirement for the contractor to coordinate with the responsible government official to respond to any “spillage” occurring in connection with the services. Spillage happens when a security incident results in the transfer of classified or controlled unclassified information onto an information system not authorized for the appropriate security level.

Defense contractors and their subcontractors will need to review the interim rule carefully and make adjustments. Of course, the focus here is not solely on personal identifiable information, but the same principles apply. Maintaining a well-thought out and practiced incident response plan is critical.