Potential Cost of DoD CMMC Certification

Businesses may incur high costs when complying with the Cybersecurity Maturity Model Certification (CMMC). However, it is imminent for any company with a contract or performs any transactions with the U.S. Department of Defense (DoD) must pass independent assessments against the CMMC requirements to win new contracts and to maintain existing contracts. It applies to all contractors and subcontractors of large or small to medium-sized businesses. In contrast to previous certification requirements where companies could perform self-assessments, CMMC requires DoD contractors to provide assessment results from third-parties to be certified. As such, it is pertinent to understand what CMMC means for your business, as well as the total certification costs.

What is CMMC?

CMMC is a government regulation first released in January 2020 to respond to ongoing and increasing exfiltration incidents of sensitive defense data and information. The regulation was developed to ensure DoD contractors’ systems have robust safeguards to prevent data leakage. Furthermore, CMMC aims to verify that contractors implement appropriate cybersecurity controls to ascertain cyber hygiene for all Defense Industrial Base (DIB) suppliers. The framework seeks to secure Controlled Unclassified Information (CUI) housed in authorized supplier systems. It defines five primary compliance levels to enable DoD suppliers to match their risk profiles to the types of data they handle. The CMMC compliance framework will be incorporated into the Defense Federal Acquisition Regulation Supplement (DFARS) to replace the NIST 800-171 cybersecurity guidelines and requirements.

Why CMMC is vital to contractors and subcontractors?

The CMMC compliance regulation is essential to primary and sub-contractors due to two main reasons. Firstly, non-complying companies have zero chance of winning or participating in any DoD contract. In particular, entities that fail to meet the requirements described in the CMMC levels specified in the DFARS regulation cannot participate in any DoD contracts. Although the CMMC rollout is gradual, all DoD suppliers should prove their compliance by demonstrating formal CMMC certification within the shortest time possible. Observing a proactive CMMC compliance offers businesses significant competitive benefits since complaint organizations will stand to win the desirable DoD contracts. Besides, prime contractors will only work with partners whose cybersecurity posture meets the CMMC guidelines, thus offering them a better competitive advantage. 

The CMMC certification is also necessary for businesses since it is the U.S.’s response to rising cyber warfare between the country and adversarial nation-states. The DoD is one of the critical departments that directly impact the U.S.’s national security. By allocating contracts to companies with inferior cybersecurity processes, the DoD exposes the country to infamous incidents, such as compromised crucial systems exfiltration of essential data and CUI. Such actions have the capacity of reducing the U.S. technical and military superiority, leaving it exposed to dangerous state-sponsored attacks. By developing the CMMC certification, the DoD expects that all entities supplying it with various resources have the same level of robust cybersecurity and data protection capabilities

A general overview of the CMMC framework

The CMMC regulation has five maturity levels that all DoD contractors must meet. Each level builds on the cybersecurity requirements specified in the other four levels. For instance, a business must comply with level one before it can advance to the second tier. When a company completes the level one maturity level, then it means it has met all the framework’s requirements. The essence of the maturity levels is to strengthen DoD contractors’ ability to secure CUI and sensitive information when discharging their contractual obligations.

The maturity levels range from Level 1, the minimum requirement on basic cybersecurity hygiene, to Level five, the most advanced level for protecting against advanced persistent threats. Each of the five maturity levels stipulates a set of cybersecurity practices, processes, and procedures related to all CMMC domains. A supplier must demonstrate that it has operationalized one level’s requirements to pass the certification assessment and proceed to the next level.

The anticipated cost of CMMC certification for my business?

The CMMC assessment costs variate, depending on various factors. They include:

  • The maturity of the currently deployed cybersecurity and IT infrastructure in relation to the CMMC level being assessed.
  • The complexity and size of the company, including all locations. 
  • The CMMC level specified in the contract or contracts an entity wishes to pursue. 
  • Scope and volume of the CUI a company handles, number of people authorized to handle the CUI, the number of databases that store the CUI, and how much CUI your business exchanges with other DIB government agencies or organizations. 
  • Expenses required to meet specific CMMC requirements, including costs for infrastructure improvements, to make file sharing and email systems CMMC compliant or shifting them to government clouds with the same protection levels, and other tech. 
  • Outsourcing, hiring, and consulting costs incurred to facilitate the CMMC assessments.
  • The expenses used to engage a certified assessor, which are primarily influenced by market forces.

As per the DoD, CMMC aims to provide businesses of all sizes with an affordable and cost-effective framework to implement their desired CMMC levels. As a result, the full CMMC certification process’s total cost is unknown but likely to align with the request maturity level. 

In this regard, the DoD considers allowable costs or expenses, including audit costs and other preparatory costs. The allowable costs are a significant factor in determining the total certification costs. Allowable expenses consist of the costs billable back to the DoD. Additionally, the Office of the Under Secretary of Defense for Acquisition and Sustainment states that “the cost of certification will be considered an allowable, reimbursable cost and will not be prohibitive.” In other words, CMMC certification costs should be considered as allowable expenses. However, other than cost-reimbursement contracts, it is doubtful for a contractor to directly bill the DoD certification costs. 

Since it is impossible to tell the actual CMMC certification costs, companies need to understand the estimated costs. The costs increase progressively as the contractors undergo higher CMMC level assessments. Also, since the certification process is a recurring procedure rather than a one-time activity, the associated costs can continue rising for different maturity levels. 

Despite the DoD contractors’ size, one thing is apparent – CMMC certification will increase the expenses needed to conduct business with the DoD. The initial costs incurred when complying with the cybersecurity requirements are high. For instance, identifying and creating missing information security policies and gathering compliance proof may take a significant amount of  hours for CMMC level 3 maturity level. The network’s complexity, testing, engineering, and missing secure configurations determine the human and physical resources needed, translating to the overall certification costs. 

Breaking down the costs

There are three main types of costs associated with CMMC certification and compliance. They are soft costs incurred when preparing for an audit, hard costs incurred when preparing for an audit, and hard costs incurred when performing the audit.

  • Soft costs incurred when preparing for a CMMC audit 

Soft costs comprise internal expenses and resources incurred during external consulting procedures. Numerous variables influence the total costs a business incurs. The variables include:

  • The size of the business
  • Total number of locations 
  • If the business requires external consulting solutions and services
  • CMMC level the company desires to be certified in 
  • The extent to which the entity handles or processes CUI
  • How far the organization has complied with NIST 800-171 regulation 

However, the costs also depend on whether it requires to outsource services like gap assessment or if conducting them using in-house personnel.

  • Hard costs for preparing for an audit 

The hard costs required to prepare for an audit may be considerably low if the complying entity has a mature cyber program. A business can consider its compliance to SP 800-171 as mature if it has made substantial cybersecurity investments in areas like endpoint security and protection, log monitoring, and multifactor authentication. For businesses whose SP 800-171 compliance is yet to be mature, they require to invest in the processes and technologies needed to meet the requirements. 

  • Hard costs involved in the audit process 

There are no official guidelines yet on how contractors should complete the compliance process. Although it is difficult to estimate the hard costs incurred when performing the audit process, they are likely to be considered allowable expenses. 

Expected Cost for Small Businesses

  • COST MANAGEMENT FACTORS
  • Program Development & Management
    • Technology & Engineering Implementation
    • Audit & Certification
  • Pricing can range from $20K to $200K depending on several factors. 
  • Market pricing for 100% of CMMC requirements is not completely understood due to changing requirements and/or interpretation of requirements.

Costs of CMMC non-certification 

While organizations seeking the DoD contracts may be unaware of the CMMC certification costs, they can quickly figure out non-certification costs. The CMMC guidelines incorporate mandatory DFARS and NIST cybersecurity requirements and protocols at the maturity levels. Contractors must comply with all requirements or risk being penalized according to the non-compliance fines set out in the respective regulations. 

CMMC’s non-certification may result in costly civil and criminal litigations, including other penalties and fines levied against a company. Besides, a data breach impacting CUI as a result of failing to comply with the CMMC certification may result in contract termination and the affected company is restricted from bidding on new contracts. Other non-certification costs include:

  • Government hearings depending on the severity of the data breach or cyber-attack
  • Damaged company reputation preventing it from winning DoD contracts or doing business with other certified companies 
  • Federal funding can be cut off, where the lost amount depends on the business size 

How to manage your CMMC certification costs effectively

You can follow the following recommendations to manage the CMMC certification costs effectively:

  • Identify the CMMC level: Understanding the desired CMMC certification level is the first and most essential phase. The CMMC level determines the types of contracts your company can bid on and win. Ensure to understand the cybersecurity standards you must meet to be certified.
  • Develop a CMMC certification cost estimate: The cost estimates should consist of expenses, such as strengthening cybersecurity protocols, updating or creating new cybersecurity policies, outsourcing to third-party assessors, and leveraging other controls that apply to the business.
  • Update current cybersecurity procedures to NIST-recommended standards: Since this is among the most expensive steps for contractors in terms of money and time, updating the current cybersecurity controls can assist in a quicker certification process, thus reducing the incurred costs.
  • Develop a plan of action: A plan of action and milestones helps your business to ensure continued compliance upon achieving the CMMC certification, which is integral to CMMC cost management.