United States: 2014 Intelligence Authorization Act Imposes Cyber Breach Reporting Requirement On Intelligence Community Contractors

Mary Elizabeth Bosco is a Partner in our Washington, D.C. office.

Many Federal Government Contractors Already Subject to Varying Cyber Security Requirements – Congress Adds a New One

HIGHLIGHTS:

• The federal government must publish new procedures 90 days after the 2014 Intelligence Authorization Act is signed. These procedures will become effective upon publication.
• Intelligence community contractors will be required to report cyber incursions and provide information to the government relating to the breach.
• The new procedures must create a mechanism for IC government personnel to obtain access to contractor equipment or information to enable the government to conduct its own forensic investigation, however, the legislation limits the scope of government access.

On July 7, 2014, President Obama signed into law the 2014 Intelligence Authorization Act that adds new requirements affecting intelligence community (IC) contractors. The new legislation recognizes the growing layers of agency-specific cyber requirements imposed on government contractors and, as explained below, contains a provision requiring the Director of National Intelligence (DNI) and the Department of Defense (DoD) to work together to harmonize the cyber regulations affecting IC and DoD contractors.

Section 325 of the 2014 Intelligence Authorization Act requires the DNI to establish procedures requiring cleared IC contractors to report to the government the successful penetration of a network or information system. The DNI has 90 days from July 7 to issue the new requirements, which will then become effective immediately.

Enhanced Protections Required for Certain Information

The legislation applies to networks or information systems that contain or process information created by or for an element of the IC triggering the requirement that the contractor must apply enhanced protections. While the bill leaves to the DNI the task of developing the specific disclosure requirements and which element or elements of the IC will receive the reports, it does specify that covered contractors must "rapidly" report incursions to their networks and systems. The bill also contains minimum content requirements for these reports as follows:

• a description of the technique or method used in the penetration
• a sample of the malicious software used in the penetration if the contractor has been able to discover and isolate the software
• a summary of information created by or for the relevant government element in connection with any program of the element that has been potentially compromised

Forensic Government Investigations Allowed

In addition to the reporting requirement, the new procedures must create a mechanism for IC government personnel to obtain access to contractor equipment or information to enable the government to conduct its own forensic investigation. The legislation limits the scope of government access by requiring that the procedures contain reasonable protection for trade secrets, commercial or financial information, and personal identification information. It also restricts access to cleared contractor information or equipment to that which is necessary to determine whether the agency's information was indeed accessed and, if so, what information was the subject of the exfiltration. The act further seeks to alleviate contractor concerns about preserving the confidentiality of their data in the event of a government investigation by prohibiting the sharing of such data outside of the IC unless the contractor to whom the data belongs approves of sharing the data outside of the IC, or the information is provided to a congressional intelligence committee, or the information is provided to law enforcement to assist in an investigation of the data breach. The act does not, however, limit dissemination of the information once it is provided to congress or a law enforcement agency.

DNI Required to Work with DoD to Harmonize Cyber Requirements

As referenced above, the Intelligence Authorization Act recognizes that DoD already has regulations in place requiring the reporting of cyber incursions, potentially subjecting contractors holding both DoD and IC contracts to duplicate and even conflicting reporting requirements. To avoid multiple overlapping requirements, the 2014 Authorization Bill requires the DNI to work with DoD to submit a single report and recommended disclosure and reporting requirements satisfying both the 2014 Authorization Act and the DoD requirements. This report is due no later than 180 days after the act becomes law.

Given this requirement, the existing DoD Federal Acquisition Supplement (DFARS) provisions and accompanying clause (DFARS 252.204-7012) may provide IC contractors with a preview of what may be in store for them in terms of cyber protection and reporting requirements. As to reporting, DoD contractors handling unclassified controlled technical information now have 72 hours to report a cyber incident. The DFARS identifies 13 categories of information that potentially are to be contained in the report, including the following:

• identification of the affected contracts
• a description of the compromised information and how it was compromised
• if the incident occurred on a subcontractor network, the name of the subcontractor

After the initial report, contractors must perform a more detailed forensic analysis and are required to preserve information concerning the incursion for at least 90 days in order to allow the government to conduct its own investigation. IC community contractors should also be aware that DFARS 252.204-7012 references NIST Special Publication 800-53 as the standard against which contractors are to assess the compliance of their own cyber security policies and practices.

In sum, the 2014 Intelligence Authorization Act requires the imposition of cyber breach reporting and investigation mandates on IC contractors. The details of these requirements are left to the DNI, but the current DFARS, clauses and referenced standards likely provide a roadmap of the regulations soon to be applicable to the IC community.

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