Government contracting compliance: Key challenges to overcome when pursuing federal contracts
Organizations that work with the U.S. government must adhere to strict procedures covering procurement protocols, nondiscrimination policies, and rigorous cybersecurity. That鈥檚 because working with government agencies often involves handling sensitive and legally protected data, and failure to comply can result in financial and legal consequences.
To effectively approach government contracting compliance, you must be prepared to align with stringent standards such as the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS), FedRAMP, and the requirements outlined in NIST 800-171 (which forms the foundation of CMMC).
In this article, breaks down notable regulations and frameworks for government contractors and the challenges you may face while pursuing them.
Government contracting compliance: What it means for your organization
Organizations that work with the U.S. government must meet strict quality and security standards, and compliance frameworks are an effective way to standardize those requirements. These regulatory frameworks apply to organizations across a wide range of industries, including defense contractors, cloud service providers (CSPs), and other entities that process or store government data.
Adhering to government standards positions your organization as a credible partner, bringing in benefits such as:
- Reduce risk of financial penalties: Noncompliance and data breaches involving sensitive information can lead to significant financial fines, loss of contracts, and long-term reputational damage. Strong compliance lowers those risks.
- Streamlined operations: Having clearly defined policies and procedures helps you operate smoothly and minimizes the risks of delays and inefficiencies.
- Building trust: Having demonstrable proof of alignment with standards favored by government agencies helps you show the maturity of your security posture to potential partners.
- Unique competitive edge: Government-oriented standards include industry best practices that give you a competitive edge even in both government and commercial markets. This is especially true for CSPs, who cannot sell to the U.S. federal government until they get their FedRAMP authorization.
FAR and DFARS
The is a regulation introduced on April 1, 1984, with the intention of providing federal agencies with clear policies and procedures that establish a standard for purchasing supplies and services. Compliance with FAR is mandatory for both government agencies and organizations they contract.
The DFARS extends FAR for (DoD) contracts. DFARS introduces additional security and reporting requirements, particularly around handling Controlled Unclassified Information (CUI).
That means, if your contract involves handling CUI, you must comply with DFARS鈥攚hich incorporates NIST 800-171 and now requires alignment with CMMC, the DoD鈥檚 certification framework built on NIST 800-171鈥攖o ensure your data security practices meet DoD criteria. Proposed updates to FAR also aim to make NIST SP 800-171 compliance a core obligation across federal contracting by standardizing how CUI requirements are identified and scoped.
To meet FAR and DFARS requirements, you need to implement a code of conduct, establish reporting protocols, and conduct regular training to ensure your employees understand and adhere to the rules.
NIST 800-171
is a special publication that provides organizations with controls for efficiently handling and securing CUI. Any organization intending to work with the U.S. government and process CUI must achieve compliance with NIST.
Compliance can be useful even for organizations that don鈥檛 intend to handle CUI since NIST can strengthen their security posture with stringent requirements across 17 families (as of rev 3):
- Access Control
- Maintenance
- Security Assessment and Monitoring
- Awareness and Training
- Media Protection
- System and Communications Protection
- Audit and Accountability
- Personnel Security
- System and Information Integrity
- Configuration Management
- Physical Protection
- Planning
- Identification and Authentication
- Risk Assessment
- System and Services Acquisition
- Incident Response
- Supply Chain Risk Management
Achieving compliance with NIST 800-171 doesn鈥檛 require a formal audit, and it doesn鈥檛 offer a certificate. You provide evidence of compliance to potential partners, who then determine whether your measures are sufficient.
Note: CMMC is built directly on the security controls in NIST SP 800-171, so many of the requirements overlap. However, CMMC adds formal certification and maturity levels, which is why we鈥檒l discuss it separately below.
CMMC
is a government framework developed by the DoD, sometimes also referred to as the Department of War under recent executive authority. Its purpose is to enhance the security posture of the and ensure the security of Federal Contract Information (FCI) and CUI.
Any organization that wants to work with the DoD must obtain a CMMC certification. The framework across 14 control domains, which from other frameworks such as NIST 800-172 and NIST 800-171 Rev 2.
The DOD recognizes that contractors and subcontractors handle different types of information, so the CMMC is structured into , based on the complexity and sensitivity of the data you handle:
- : Aimed at organizations that primarily handle FCI and encompasses six out of 14 control areas. To obtain a certificate, conduct an internal assessment and enter your results into the Supplier Performance Risk System (SPRS).
- : Intended for organizations that handle both FCI and less critical CUI, this level covers 110 practices across all 14 areas. Certification requires either a self-assessment or an audit by a , the results of which must be uploaded to the CMMC Enterprise Mission Assurance Support Service (eMASS).
- : Aimed at organizations that handle highly sensitive CUI. Requires both a Level 2 certificate and an additional 24 controls from NIST 800-172. To achieve compliance, you鈥檒l need to pass an audit by the .
All three levels require annual affirmations to maintain compliance, while Levels 2 and 3 require a full reassessment every three years to maintain certification.
FedRAMP
is a risk management program that standardizes risk assessments, authorizations, and continuous monitoring practices for cloud services working with government agencies. Compliance isn鈥檛 legally mandatory for all organizations, but it's a hard requirement for CSPs serving federal agencies. CSPs must obtain FedRAMP authorization before they can offer services to the U.S. federal government.
FedRAMP鈥檚 voluntary nature also means that you won鈥檛 receive penalties for noncompliance. However, failing to align with the framework may drastically limit business opportunities in regulated markets, even causing you to lose out on existing federal contracts.
The compliance process typically involves these steps:
- Conduct an internal assessment
- Remediate identified gaps
- Undergo a third-party audit
- Obtain authorization
- Continuously monitor controls for efficiency
Which government compliance framework should you pursue?
The government sector framework you should pursue depends on the industry best practices and your current security posture. If you鈥檙e a cloud provider, you鈥檒l need to comply with FedRAMP, which is built on NIST security controls. If you plan to collaborate with the DoD, you鈥檒l need to meet CMMC requirements, which formalize NIST 800-171 controls for defense contractors.
The risks of noncompliance are high. Aside from financial penalties, noncompliance can lead to contract termination, loss of eligibility for future awards, and reputational damage.
If you intend to pursue government contracts but are still maturing your security posture, start by aligning with NIST CSF and NIST 800-171. Both frameworks provide strong security baselines that public sector buyers expect.
A major benefit of government compliance is that these standards are complementary and often share several controls. Once you achieve compliance with one of them, it'll be faster to meet the other.
Challenges of government contracting compliance
Government compliance can be a complex and challenging process. Some of the most common roadblocks organizations encounter include:
- Extensive compliance requirements: Due to the sensitive nature of the data they protect, government frameworks have complex requirements that can be difficult to meet. This is particularly true for smaller and resource-constrained organizations that may lack in-house expertise.
- Continuous monitoring: Government compliance is an ongoing effort, and one of the core requirements is establishing ongoing monitoring procedures, which can be time-consuming and pull your teams away from other essential tasks.
- Frequent risk assessments and internal audits: Maintaining compliance requires conducting frequent risk assessments and internal audits, which require both deep planning and resource investments.
Documentation expectations: Thorough documentation is nonnegotiable for government contracting compliance, but gathering the required evidence often involves sifting through disparate systems and siloed technologies, which puts significant pressure on your security and compliance teams.
A common mistake organizations make when pursuing government compliance is improperly scoping the environment or services they are providing as part of the contracts, leading to issues and delays in compliance programs overall.鈥
An effective way to approach this issue is to implement a that will enable real-time insights, centralize documentation, and ensure a consistent audit process.
Final thoughts on government contracting compliance
Government contracting compliance is complex, but it鈥檚 also achievable with the right foundation. Frameworks like FAR, DFARS, NIST 800-171, CMMC, and FedRAMP are designed to protect sensitive data, and because they share common controls, progress in one area accelerates readiness in others. By taking a structured, continuous approach to compliance and leveraging automation to reduce manual effort, organizations can pursue federal contracts with greater confidence and less operational strain.
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