July 5, 2022

Volume XII, Number 186

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DoD Memo Reveals Poor Scorecard for Agency’s Inclusion of the UCTI DFARS Clause in New Contracts

On February 25, 2015, the Office of the Secretary of Defense (AT&L) issued a memorandum containing an agency “Scorecard” for the implementation of the DFARS clause on safeguarding Unclassified Controlled Technical Information (“UCTI”).  The final UCTI rule was published on November 18, 2013 and required the new DFARS clause 252.204-7012−which imposes requirements for (1) safeguarding UCTI that is “resident on or transiting through contractor unclassified information systems,” and (2) reporting cyber incidents and UCTI compromises−to be included in all solicitations and contracts, including those for commercial items.  The Defense Procurement and Acquisition Policy (“DPAP”) office reviewed contract clause compliance data for the first quarter of 2015 and found that DFARS clause 252.240-7012 was included in only 65% of new awards.

In grading Department of Defense (“DoD”) components, DPAP assigned one of three possible grades:  green if 92% or more of the newly awarded contracts contained the clause, yellow if at least 85% but less than 92% contained the clause and red if less than 85% contained the clause.  DPAP showed all DoD components in red, with DCMA at the bottom with a 2% rating and DLA at the top with 82% of new awards containing the clause:

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DoD Memorandum at 3.  This lack of internal compliance with the UCTI rule is concerning as the UCTI rule is far more developed than most of DoD’s recent cyber regulations.  DoD has placed great importance and provided significant guidance on this regulation, as demonstrated by DoD’s December 2014 Procedures, Guidance, and Information (“PGI”) 204.73 for implementing the UCTI rule, which includes a set of frequently asked questions.  For example, the PGI confirmed that the requirements only apply to data that is marked with an appropriate Distribution Statement as defined by DoD instruction 5230.24.  It also provided guidance on how DoD will evaluate claims from contractors that a particular safeguarding control is either not applicable or that an alternative to the specified government control is sufficient.  Similarly, the PGI provides guidance as to how cyber incident reports will be handled within DoD and notes that DoD may assign a contracting officer to assess a contractor’s compliance with the safeguarding controls imposed by the UCTI rule in light of a cyber-incident report.

In keeping with DoD’s interest in the implementation of these requirements, DPAP will publish a quarterly scorecard on the inclusion of the clause in new awards.  Given the scrutiny that DoD components now find themselves under, contractors should expect to see a renewed effort by DoD to include the UCTI DFARS clause in all new contracts going forward.

© 2022 Covington & Burling LLPNational Law Review, Volume V, Number 62
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About this Author

Susan B. Cassidy, Government Contracts Attorney, Covington Burling, Law Firm
Partner

Susan Cassidy advises clients on the complex rules and regulations imposed on government contractors, with a special emphasis on the defense and intelligence sectors. She combines a sophisticated knowledge of the FAR and DFARS with the practical insight gained from senior in-house positions at both dedicated defense and commercial item contractors.

Ms. Cassidy conducts internal investigations for clients on wide array of government contracts and national security compliance issues. She regularly advises on FAR mandatory disclosure obligations and represents...

202-662-5348
Catlin Meade, Cybersecurity lawyer, Covington
Associate

Catlin Meade advises clients across a broad range of cybersecurity and government contracts matters, including government and internal investigations, compliance with cybersecurity and data breach regulations, and SAFETY Act applications.

Representative Matters

  • Counsel to multiple companies in responding to data and cybersecurity incidents.
  • Advised a leading defense contractor on a multi-million-dollar prime-subcontractor dispute in connection with a NATO contract.
  • Key member of team that successfully represented a large government...
202-662-5889
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