In today's episode of the CMMC Compliance Guide Podcast, host Brooke Justice and guest cohost Stacey from Justice IT Consulting break down one of the most critical topics for Department of Defense (DoD) contractors: How CMMC compliance affects your ability to win and retain lucrative defense contracts.

Why Does CMMC Matter for DoD Contractors?

If you operate within the DoD sector—whether in manufacturing or a related field—you likely already know that cybersecurity compliance is a major requirement. Primes are increasingly demanding compliance from their subcontractors, and DoD regulations are evolving to enforce stricter requirements. If you want to remain competitive and eligible for contracts, CMMC compliance is non-negotiable.

Do You Need CMMC Certification to Win DoD Contracts?

As of now, a CMMC certification is not yet required for contracts, but compliance with cybersecurity standards is. The introduction of CMMC Level 2 certifications at the end of last year means that certification will soon become a necessity. When the 48 CFR rule becomes final—expected in Q1 of 2025—CMMC certification will be required for specific contract levels. Businesses should start preparing now to avoid losing contract eligibility.

Does CMMC Compliance Give Companies a Competitive Edge?

Absolutely. Although not yet mandatory, businesses that are already compliant have a distinct advantage. Companies that achieve compliance early are seen as "green" in prime contractor systems, making them easier to select for contracts. Additionally, primes are actively rewarding subcontractors that are fully compliant, ensuring they maintain preferred supplier status.

What to Expect in the Coming Years

When the 48 CFR rule takes effect, CMMC requirements will be phased in over four years:

• Year 1: Self-attestation remains acceptable but with some changes due to finalized 32 CFR regulations.

• Year 2: CMMC Level 2 certifications will begin appearing in contracts.

• Subsequent Years: Compliance requirements will gradually become mandatory across more contracts.

• The DoD has also allowed for flexibility, meaning some contracts may not require immediate compliance but will phase it in over time.

Understanding CMMC Compliance Levels

There are three levels of CMMC compliance:

• Level 1: Basic cybersecurity protections, typically for companies handling Federal Contract Information (FCI).

• Level 2: The most common requirement, aligning with NIST 800-171 controls. This is the standard for most DoD contractors.

• Level 3: A more stringent set of requirements, aligned with NIST 800-172, for high-priority defense contracts.

• Most businesses working with the DoD will need to meet Level 2 compliance.

Should Companies Pursue Compliance Even if Not Required?

Yes. Even if your company is not currently required to be CMMC-certified, obtaining certification can be a strong marketing advantage. When CMMC requirements go into full effect, primes and the DoD will favor contractors that have already secured certification. Being ahead of the curve can increase business opportunities and position your company as a reliable partner.

Preparing for Certification: Steps to Take

• Start the Process Now: Certification takes time, with assessors currently booked months in advance.

• Understand the Difference Between Compliance and Certification: Compliance means meeting all the necessary controls, while certification requires a formal assessment by a CMMC Third-Party Assessment Organization (C3PAO).

• Maintain Clear Documentation: Policies and procedures should be detailed and easy to understand.

• Use a Governance, Risk, and Compliance (GRC) Platform: This software helps keep all documentation, policies, and compliance tracking in one accessible place.

Avoiding Compliance Pitfalls

One of the biggest mistakes businesses make is failing to update documentation when changes occur. If you modify your IT infrastructure, network, or processes, you must ensure corresponding compliance documentation is updated. Mergers and acquisitions can also disrupt compliance, so businesses should proactively address any structural changes that might impact certification status.

Legal Consequences of Non-Compliance

Failing to meet compliance requirements can result in:

• Loss of Contracts: If a company fails certification, it risks losing its DoD contracts.

• False Claims Act Violations: If a company misrepresents its compliance status, it could face severe legal and financial penalties, including lawsuits and fines.

• Reputation Damage: Companies that fail assessments may struggle to regain trust from DoD officials and prime contractors.

Holding Vendors and Subcontractors Accountable

DoD contractors are responsible for ensuring their subcontractors also meet CMMC requirements. This can be managed by:

• Requiring vendors to complete compliance questionnaires.

• Adding compliance verification clauses to contracts.

• Requesting proof of certification from suppliers.

• Prime contractors have long been responsible for ensuring their subcontractors comply, and now subcontractors must do the same for their suppliers.

CMMC compliance is becoming an unavoidable requirement for businesses looking to win and maintain DoD contracts. Companies that proactively address compliance will have a competitive edge and avoid the risks associated with non-compliance.

If you need guidance, book a 10-minute discovery call with us at cmmccomplianceguide.com/discoverycall for expert advice and support.