Who Needs to Be FAR Compliant? Safeguarding Government Contracts


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I’ve seen how a lack of compliance can leave businesses vulnerable to cyber threats. That’s why I want to talk to you about FAR compliance and why it’s essential for safeguarding government contracts.

As a business owner, you might assume that cybersecurity is only relevant to tech companies or e-commerce websites. But in reality, any organization that wants to do business with the government needs to be FAR compliant. Otherwise, you could find yourself shut out of lucrative contracts, losing out on potential revenue, and damaging your reputation.

The Federal Acquisition Regulation (FAR) lays out the rules and regulations that any business dealing with the federal government needs to follow. It covers everything from contract solicitations to how to handle classified information.

Whether you’re a small business just starting out or a larger corporation with years of experience, FAR compliance is crucial. It not only protects your organization from cyber threats, but it also ensures that you’re following all of the necessary regulations to work with the government.

In this article, I’ll dive into exactly who needs to be FAR compliant, what the requirements are, and how you can get started with ensuring your organization is meeting the standards. So grab a pen and paper, and let’s explore the world of FAR compliance.

Who needs to be FAR compliant?

Who needs to be FAR compliant? As previously mentioned, every company with a federal contract must adhere to FAR regulations. However, there is an additional requirement for companies who handle Controlled Unclassified Information (CUI). These companies also have to comply with the Defense Federal Acquisition Regulation Supplement (DFARS) guidelines. This means that DoD contractors and subcontractors are typically required to adhere to both FAR and DFARS regulations.

Here are some key points to keep in mind for companies that need to be DFARS compliant:

  • DFARS compliance applies to companies that store, process, or transmit CUI. This includes both prime contractors and subcontractors who handle this type of information.
  • There are 110 security controls outlined in the DFARS guidelines. These controls are put in place to protect CUI from unauthorized access and disclosure.
  • DFARS compliance also requires companies to report any cybersecurity incidents to the DoD within 72 hours.
  • Companies that fail to meet DFARS compliance requirements risk losing their contracts or facing legal action. It’s essential to take this seriously and ensure that all required security measures are in place.
  • Overall, DFARS compliance is a crucial aspect of doing business with the DoD. Companies that handle CUI must adhere to these guidelines to protect sensitive information and ensure the security of their networks. It’s essential to take a proactive approach and stay up-to-date on any changes to these regulations to avoid compliance issues and ensure success in federal contracting.

    ???? Pro Tips:

    1. Identify if you handle federal awards: To know if you need to be FAR compliant, determine if you work with federal agencies in the form of grants, loans, or contracts. If you do, then you are required to comply with the FAR regulations.

    2. Conduct a thorough review of your financial system: To be FAR compliant, your financial system should meet the accounting requirements set forth in the regulation. Thus, evaluate your system to ensure that it records and reports all transactions accurately and meets the cost principles of the FAR.

    3. Maintain proper documentation: FAR compliance mandates that the financial records should be available for review for at least three years after the award’s completion. Ensure that you maintain proper documentation in compliance with the FAR regulation’s requirements.

    4. Train your employees and update policies:To remain FAR compliant, you need to keep your employees well-versed in the changes and updates in the regulations. Train them on the requirements and the consequences of non-compliance. Review and update the policies to align with the regulation.

    5. Conduct periodic audits: You need to conduct periodic internal reviews to identify any potential violations. If you find any, take immediate action to rectify the error and prevent recurrence. Additionally, engage the services of a qualified external auditor to conduct an independent review of your financial system and procedures and ensure FAR compliance.

    Overview of FAR Compliance

    Federal Acquisition Regulation (FAR) governs the acquisition process of federal agencies in the United States. Every company that wants to do business with the government must comply with FAR. However, companies that store, process, or transmit Controlled Unclassified Information (CUI) have additional legal requirements to adhere to the Defense Federal Acquisition Regulation Supplement (DFARS). The standard is designed to protect sensitive information and reduce the risk of breaches, theft, and other types of cyber attacks.

    What is Controlled Unclassified Information (CUI)?

    CUI refers to any sensitive information that is not classified but still requires protection to prevent unauthorized access, disclosure or destruction. Examples of CUI include data related to defense, critical infrastructure, law enforcement activities, and export controls, among others. The information may be stored on computers, mobile devices, paper documents, or other media, and its protection must follow strict guidelines.

    Legal Requirements for DFARS Compliance

    Companies that store, process, or transmit CUI must comply with DFARS Clause 252.204-7012. The requirements include implementing adequate security controls to safeguard the information, reporting incidents and attacks, and ensuring that subcontractors comply with the same rules. The deadline for compliance was December 31, 2017, and non-compliance may result in losing government contracts altogether. It is important to note that compliance will be audited through the review of a company’s cybersecurity documentation, policies, and procedures.

    Implications of Non-Compliance with FAR

    Non-compliance with FAR can result in significant financial and reputational losses for companies. For example, a company may lose government contracts, incur legal fees, and be liable for breach notification costs and financial damages awarded to affected parties. Furthermore, the company’s reputation may be tarnished, making it difficult to secure future business.

    Importance of Compliance for DoD Contractors

    The Department of Defense (DoD) requires all of its contractors and subcontractors to be DFARS compliant as part of its cyber security strategy. The DoD is a major purchaser of products and services, and its contractors must follow the rules to be considered for contracts. Compliance with DFARS ensures that the government’s sensitive information is protected and the company is not a risk that can lead to serious consequences.

    Steps to Achieve FAR Compliance

    Achieving FAR compliance requires a holistic approach to cybersecurity that involves technical, administrative, and physical controls. Companies should take the following steps to become FAR compliant:

  • Conduct a risk assessment to identify potential risks and vulnerabilities to CUI data.
  • Develop and implement a written security plan that addresses all the requirements of DFARS Clause 252.204-7012.
  • Use encryption, multi-factor authentication, and other cybersecurity measures to protect CUI data.
  • Report incidents and attacks to the incident response team and government authorities as appropriate.
  • Train employees on cyber security awareness and best practices to reduce human error.
  • Monitor systems for potential security threats and address them proactively.

    FAR Compliance Best Practices for DoD Contractors

    DoD contractors can use the following best practices to maintain FAR compliance:

  • Regularly monitor and assess the security posture of the organization to identify and remediate any vulnerabilities.
  • Conduct background checks on employees and third-party vendors that will handle CUI data.
  • Conduct regular cyber security training for employees and emphasize the importance of adhering to security procedures and controls.
  • Conduct mock drills to test and evaluate preparedness for security incidents.
  • Maintain an incident response plan that is tested and updated regularly.
  • Use strong encryption and access controls to limit the potential damage of a data breach.

    Resources for FAR Compliance

    The following resources are available for companies that need to achieve FAR compliance:

  • The National Institute of Standards and Technology (NIST) has published guidelines on cyber security standards for federal agencies that can be a source of guidance.
  • The Defense Counterintelligence and Security Agency (DCSA) provides training, webinars, and other resources to help DoD contractors achieve and maintain compliance.
  • The company’s contracting officer is a resource for guidance on federal regulations and compliance.
  • Industry associations and groups can offer assistance and guidance as well as industry best practices.

    In conclusion, FAR compliance is a key requirement for any company that works with sensitive information or wants to do business with the government. DoD contractors, in particular, must follow DFARS regulations to protect CUI data and keep the government’s sensitive information secure. By taking a proactive approach to cyber security and adhering to best practices, companies can avoid legal and financial penalties and maintain their reputation in the market.