CMMC Compliance and False Claims Act: Understanding the Critical Intersection

Government contractors face an evolving landscape where cybersecurity compliance has shifted from a contractual checkbox to a serious enforcement priority with significant legal implications, according to legal experts.

The Department of Defense’s Cybersecurity Maturity Model Certification (CMMC) requirements are increasingly intersecting with the False Claims Act (FCA), creating a heightened litigation risk for contractors and subcontractors in the federal space. This convergence represents a new frontier of liability that companies must navigate carefully.

Under CMMC 2.0, which streamlines the previous iteration of the framework, contractors handling sensitive government information must meet specific cybersecurity standards. While full implementation timelines have faced delays, the requirements outlined in the Defense Federal Acquisition Regulation Supplement (DFARS) cybersecurity clauses remain in force and continue to serve as the foundation for compliance obligations.

The critical concern for contractors is how cybersecurity non-compliance can evolve into False Claims Act allegations. This can occur through express certification, where a company explicitly states compliance with requirements it hasn’t met, or through implied certification, where the mere act of accepting payment implies compliance with all contract terms, including cybersecurity provisions.

“The intersection of CMMC and the False Claims Act creates a perfect storm of risk for government contractors,” notes one industry observer. “Companies may not realize that routine representations about their cybersecurity posture can become the basis for substantial liability if those representations aren’t accurate.”

Whistleblowers are playing an increasingly prominent role in this enforcement landscape. Employees with knowledge of cybersecurity deficiencies can bring qui tam lawsuits under the False Claims Act, which allows them to share in any financial recovery obtained by the government. These insider actions have become a significant driver of enforcement activity.

Adding to this pressure, the Department of Justice launched its Civil Cyber-Fraud Initiative in 2021, specifically targeting companies that knowingly provide deficient cybersecurity products or services, misrepresent their cybersecurity practices, or violate obligations to monitor and report cybersecurity incidents. This initiative has already resulted in several notable settlements and continues to gain momentum.

For contractors handling Controlled Unclassified Information (CUI), the stakes are particularly high. This designation covers information that requires safeguarding but isn’t classified, including technical data, procurement information, and other sensitive but unclassified government information.

Legal experts emphasize that “reasonable diligence” and good faith compliance efforts are essential defenses against potential claims. This includes conducting regular risk assessments, documenting remediation efforts, implementing required security controls, and maintaining clear evidence of compliance activities.

“Documentation is crucial,” said a cybersecurity compliance specialist. “In the event of an investigation, being able to demonstrate good faith efforts toward compliance, even if perfection wasn’t achieved, can make the difference between an educational outcome and punitive enforcement.”

Companies should consider early assessment of their cybersecurity programs against applicable requirements and document their compliance journey thoroughly. This approach creates contemporaneous evidence of good faith efforts that can prove invaluable if questions arise later.

Proactive legal guidance has also become essential as the regulatory landscape continues to evolve. Contractors should consider engaging counsel familiar with both cybersecurity requirements and False Claims Act litigation to help identify and mitigate risks before they escalate.

For the thousands of companies throughout the defense industrial base, these issues are no longer theoretical concerns but practical business risks that require immediate attention. Small and medium-sized businesses that may serve as subcontractors on government projects face particular challenges, as they must meet the same rigorous standards as prime contractors but often with fewer resources.

As federal agencies continue to emphasize the importance of supply chain security, contractors at all levels must recognize that cybersecurity compliance has become an enforcement priority with potentially severe consequences for those who fall short.