What Are the Consequences of Noncompliance?

What Are the Consequences of Noncompliance?

Navigating DFARS 252.204.7012 compliance requirements can be challenging. It requires tightening DFARS-specific security controls, an area in which the expertise of compliance experts who can help fill the gaps in your IT system will prove invaluable. More importantly, they can help ensure you abide by your contract with the Department of Defense (DoD) to protect covered defense information (CDI) as stated in the NIST SP 800-171 guidelines. In the process, you avoid the consequences of DFARS noncompliance.

Compliance with the DFARS 252.204.7012 clause has been required since December 2017, and as a primary contractor or subcontractor, you are expected to demonstrate compliance to protect CDI per the Department of Defense’s mandates. Penalties and other consequences await those that don’t.

Penalties for DFARS Noncompliance

If a contractor is discovered to not have implemented DFARS-related rules, one of the consequences is being issued a stop-work order. This may be lifted when the organization has taken the necessary steps to implement security measures that protect CDI per DoD-approved mandates. 

However, consequences may be more severe; they may come in the form of the following administrative, civil, and criminal penalties:

  • Breach of Contract Damages
  • False Claims Act Damages
  • Liquidated Damages
  • Poor Past Performance
  • Suspension/Debarment
  • Termination for Convenience
  • Termination for Default

The most obvious consequence of noncompliance is disqualification from acquiring or renewing a DoD contract. Note that conducting business with noncompliant third parties can also result in being barred from working with the DoD. On the other hand, organizations that meet compliance requirements can continue working with or for the DoD and keep a competitive edge. 

Downtime and Loss of Productivity

Dealing with administrative, civil, and criminal cases is a lot of work. Other than receiving a stop-work order, your team will be handling a substantial amount of legal paperwork, which costs time and resources. You may have to halt production and only be allowed to recommence once gaps have been filled and mistakes have been rectified. This leads to loss of productivity and, in a worst-case scenario, going out of business.

This is why it’s vital to be compliant in the first place. Having a DoD contract is valuable, and it would benefit all parties — including prime contractors, subcontractors, and other business partners — to abide by the rules that enable you to retain that contract. Teaming up with DFARS experts like Charles IT that have helped defense contractors meet security controls is crucial to achieving and/or maintaining a contract. What’s more, working alongside compliance professionals helps you avoid legal repercussions and business downfall due to noncompliance.

Reputational Damage

To keep a government contract, it’s imperative to understand DFARS 252.204-7012 and NIST 800-171 and why compliance is nonnegotiable. Needless to say, noncompliance means losing a government contract, which also has the added consequence of tainting your organization’s record, thereby affecting future dealings with other clients and business partners.

Loss of customer trust is usually accompanied by financial losses due to difficulties finding and retaining clients as well as spending large amounts of money on costs associated with fixing your business’s reputation. And as if that’s not enough, a potential criminal/legal case could result in the permanent closure of your business.

How a Gap Assessment Can Help You Stay Compliant

Being DFARS-compliant is a must, whether your organization is trying to win a contract or keep a current one. Your organization must also implement holistic policies involving technology, processes, and workforce — security controls that are nonnegotiable based on the NIST 800-171 guidelines. Contractors should also follow procedures in the event of a security incident involving CDI.

A gap assessment covers all the bases in terms of DFARS 252.204.7012 compliance. Charles IT’s team of DFARS experts will identify the gaps in your organization’s security position and help you fill them in. As your DFARS compliance partner, we will also help you prepare for audits and assist you in developing and implementing a cyber incident reporting strategy.

Whether you are a small or large contractor, having a strong security posture and achieving compliance are essential to keeping your DoD contract. We offer best-in-class managed IT services and DFARS compliance expertise that ensure you meet federal security standards. Schedule a gap assessment today. You may reach us via phone, email, or text!

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