Government contractors have a wide range of unique challenges (find out more about these here), 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.

Tags: cloud computing, Contractor, Department of Defense, DOD, incident response, National Defense Authorization Act, security incident, subcontractor
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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.

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