*Updated August 13, 2020*
CMMC cybersecurity is an “allowable cost” for DoD contractors?
“The required CMMC level will be contained in sections L & M of the Request for Proposals (RFP) making cybersecurity an “allowable cost” in DoD contracts.”
“The cost of certification will be considered an allowable, reimbursable cost and will not be prohibitive. For contracts that require CMMC you may be disqualified from participating if your organization is not certified.”FAQ for CMMC ( https://www.acq.osd.mil/cmmc/faq.html )
This statement about allowable cost is reassuring. However, as someone familiar with the RFP process, I’m not sure how that would work in reality.
Cybersecurity during contract performance
Once a contract is awarded, I can certainly see cybersecurity as an overhead cost. Yearly renewals for security licenses, full time cybersecurity engineers, regular penetration testing, audit and certification costs all make sense. These will continue over the life of your contract.
I would expect to see defense contractors leaning more toward subscription models of computing, since these charges would occur primarily during the contract and be more justifiable as a cost. It will be difficult to justify costs for upgrades and security before a contract starts.
Is preparing for CMMC an allowable cost?
But what about the cost to increase security and obtain CMMC certification before the contract is awarded? During the listening tour I attended, it was stated that an RFP response requires certification at Level X as a “go / no-go” to even qualify.
What if ten companies bid on the contract and your company is not chosen? You still had to certify your network against CMMC. How can you translate that into an allowable cost?
What if you aren’t lowest price anymore?
If you implement more cybersecurity than the minimum required by the contract, your costs will be higher than your competitors. This is a problem because you have to win the contract or the renewal in order to charge it back to the government.
The cost of CMMC (and all cybersecurity) compliance
The initial cost of cybersecurity compliance is high. Just writing policies and gathering proof of compliance will take 300-600 hours for existing networks at Level 3. (This is a ballpark estimate from my experience, please comment with your thoughts.) Depending on the complexity of your network, engineering, testing, and applying secure configurations will take much longer. Bringing existing systems up to the required level of security can easily take 1,000 – 2,000 consultant hours.
For example, it could take 100 hours for your Linux administrator to fully secure a single Red Hat database server. Then repeat for your web server, your file server, your directory services, your desktops, your backup solution… Every time you add a new type of system, you need to review your CMMC requirements against it. For example, even if you secure your database server fully, if your file server has a weak password policy, you have a problem.
How will CMMC auditors determine the network scope before a contract?
Option 1: “Secure” enclave
Let’s imagine a company that wants to bid on a CMMC Level 3 contract. The company doesn’t currently have any Level 3 contracts, so they set up a “secure enclave” with one server and one PC to get audited at level 3.
Will CUI data need to be on the network before auditing is performed? That doesn’t seem logical for a company that doesn’t have a contract yet.
How would the company show that they are operating with mature processes, if they aren’t using the network yet?
Does a company need to show that they are using their evaluated network? Especially when the contract hasn’t been awarded yet?
Option 2: Audit the entire corporate network
Will the focus of the CMMC include all corporate networks? This could be a total show stopper for large multi-national corporations. We might see a wave of decentralization where rather than a central IT department, each building or unit has its own zero-trust network.
For wanna-be contractors that haven’t won a bid yet, it would be very expensive to secure and audit their entire network at level 2+ when they don’t know if they will win a bid.
What about corporate networks used for other contracts and private sector? Are they included in the audit?
What to do?
These questions still exist even in August 2020.
I don’t have answers to these questions. The DoD will need to provide more guidance.
The best advice I have for new companies (that don’t have contracts yet) is to concentrate on CMMC level 1 first and win a few contracts at that level before investing more in security. As you try to reach higher levels of CMMC compliance, the costs increase dramatically.
Please comment with your thoughts, or if you’ve heard any answers to these questions!
Next article: How to prepare for CMMC Level 1
V. Amira Armond (CISSP, CISA, PMP, MBA) is a computer systems architect, cyber-security consultant, and owner of Kieri Solutions LLC. She specializes in CMMC preparation and DFARS 252.204-7012 compliance, and designing secure and resilient enterprise systems for private sector and the DoD. She is the chief editor for cmmcaudit.org, a non-sales website that provides news and informational articles about the Cybersecurity Maturity Model Certification.
I want to hear from you!
I would love to hear your thoughts, and if you’ve heard any clarification about cybersecurity being an allowable cost. Please leave a comment below!
8 thoughts on “CMMC “allowable cost” discussion and thoughts”
You should update this page again as DoD has now said that there will be no direct reimbursement for “allowable costs” for contracts through CMMC Level 3. The additional cost should be considered overhead and be reflected in the rates offered. There may be some direct reimbursement for costs associated with attaining Level 4 or 5, but it sounds like that will be addressed in individual contracts.
Not true according to the Office of the Under Secretary of Defense for
Acquisition & Sustainment for Cybersecurity Maturity Model Certification:
18 – What if my organization cannot afford to be certified? Does that mean my organization can no longer work on DoD contracts?
The costs associated with implementing CMMC requirements, supporting the CMMC assessment, and contracting with the C3PAO will be considered an allowed cost. For contracts that include the CMMC requirement, you will not be awarded the contract if you are not certified at the appropriate CMMC level at the time of contract award.
How does one become an “accredited and independent third party commercial certification organization” to perform the CMMC audits?
(Per the listening tour that I attended a few months back), the intent seemed to be..
1) The Office of the Undersecretary of Defense for Acquisition and Sustainment (OUSD(A&S)) would help stand up a 3rd party CMMC accreditation body, ideally a non-profit organization, that would be in charge of approving new auditors.
2) Once the non-profit organization is running, they will create the process/requirements for becoming an auditor.
3) The first wave of auditors are approved and begin certifying organizations against CMMC.
What has actually happened? Around September/October 2019, OUSD(A&S) released a Request for Information (RFI) HQ0034SS10032019 asking for inputs on defining the CMMC Accreditation Body. If this is like other contract cycles, the next step is to release a Request for Proposal (RFP) and get bids from companies that want to perform the work. We will have to wait for the RFP or more word from OUSD(A&S) to know for sure.
Here is the updates page from OUSD(A&S): https://www.acq.osd.mil/cmmc/updates.html
A. Is there a timeline of when the (OUSD(A&S) would help stand up the CMMC Accreditation body?
B. Until this Accreditation body is operating – are there any auditors who can start to perform a CMMC Pre-Audit assessment now?
C. And is the draft CMMC developed enough to provide the audit requirements for use in a Pre-Audit assessment?
What I know ….
a. Original schedule (see pg 12) – https://www.ndia.org/-/media/sites/policy-issues/cmmc-brief—5-jun-19.ashx?la=en. Haven’t seen an updated schedule.
c. Check out this free template offered by ComPlyUp – https://www.complyup.com/cmmc-ssp-template/
Amira, Thanks for the information.
I put together this article to answer your question. Hope it helps.