The Department of Defense (DoD) Cybersecurity Maturity Model Certification (CMMC) final rule, effective November 10, 2025 with Phase 1 implementation, fundamentally transforms cybersecurity compliance for defense contractors.  Fluet has been helping clients prepare for this important change.  This shift comes amid aggressive Department of Justice (DOJ) enforcement with the Civil Cyber-Fraud Initiative (see previous Fluet Industry Update on this topic). For defense contractors handling Federal Contract Information (FCI) or Controlled Unclassified Information (CUI), understanding the intersection of CMMC requirements and False Claims Act (FCA) liability has become essential to protecting both contracts and company survival.

Key Takeaways

  • Broad Applicability: If you intend to continue to contract with the DoD, avoiding CMMC requirements will be nearly impossible as it gets phased in.  “CMMC Program requirements apply to all DoD solicitations and contracts pursuant to which a defense contractor or subcontractor will process, store, or transmit FCI or CUI on unclassified contractor information systems, including those for the acquisition of commercial items.” (32 CFR §170.3(c))
  • Continuous Compliance: Contractors must maintain “current CMMC status” throughout contract performance (32 CFR §170.22) with attestation no less than annually, creating ongoing FCA risk for any post-award compliance lapses.
  • Potential for Large Penalties:  Each potential false claim can result in a penalty of up to $28,619 in 2025 plus 3 times the amount of damages that the Government sustains (31 U.S.C. 3729). Each of the 110 NIST SP 800-171 controls required at Level 2 (32 CFR §170.16) could trigger separate FCA penalties if the Government believes there is a false attestation or claim, meaning failure to properly implement even a few controls within your program could generate large penalties (see e.g., a recent settlement of a cyber-related False Claims Act case for more than $11 million).  Additionally, issues in compliance could also trigger contract termination, negative past performance ratings, and even suspension and debarment proceedings.
  • Outside Assessment Offers Some Safe Harbor: The new third-party assessments that will be required for some contractors in Phase 2 and beyond (32 CFR §170.17) should provide mitigation against FCA exposure by establishing independent evidence of compliance, but only if contractors are forthcoming during assessments and maintain compliance after certification.

The stakes are extraordinary. Of particular note for defense contractors, DOJ’s emphasis on pursuing cybersecurity cases even where national security may not have been directly compromised.

Defense contractors should treat CMMC compliance as a core business imperative requiring executive-level attention, not merely an IT project. The November deadline is firm with no grace period for new bidders subject to Phase 1 implementation.

Companies should immediately:

(1) assess the level of information they likely will need to store, process, or transmit and determine what level of certification their business will require;

(2) conduct honest gap analyses against requirements for that level;

(3) develop comprehensive remediation roadmaps with realistic timelines;

(4) establish internal controls for ongoing compliance monitoring;

(5) implement robust whistleblower reporting mechanisms; and

(6) consider early engagement with qualified C3PAOs and other professionals as needed to establish relationships before deadlines create bottlenecks.

Most importantly, contractors facing compliance gaps should consult experienced counsel before responding to government inquiries or making attestations where there are issues. Although circumstances vary, strategic decisions with advice of counsel may transform potential eight-figure liability into manageable situations while preserving government contracting eligibility. For questions about CMMC compliance strategy, FCA risk mitigation, or navigating DOJ cybersecurity-related investigations, contact Fluet’s Government Contracts Practice.