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Maximize Cybersecurity Readiness: Key Government Contracts Legal Update for October 2025

SEO Meta Description: Prepare your business for the crucial November 2025 DFARS changes. This update covers the final CMMC rule integration, mandatory contractor requirements, and key government contracts case law regarding sole-source justifications and contract termination.

The dynamic landscape of government contracts requires businesses to stay ahead of regulatory shifts and legal precedents. This October 2025 legal update offers a comprehensive overview of the most significant decisions and regulatory changes affecting federal and state government contractors, compiled by the Government Contracts group at Gordon Rees Scully Mansukhani.

The CMMC Final Rule: Cybersecurity Becomes Contract-Ready

The most critical development this month is the integration of the Cybersecurity Maturity Model Certification (CMMC) program into defense contracting. On September 10, 2025, the Department of Defense (DoD) issued a long-awaited final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS). This rule establishes uniform procedures for assessing and verifying how contractors implement essential cybersecurity requirements.

This pivotal rule becomes effective on November 10, 2025, marking a major step toward fully integrating CMMC into the defense acquisition process.

New Rules for Contract Eligibility

Contracting officers operating after the November 10 effective date will include the revised DFARS clause 252.204-7021 in solicitations and contracts. This clause formally ties eligibility for award to a contractor’s CMMC standing.

Crucially, contracting officers cannot award a contract to an offeror lacking a current CMMC status in the Supplier Performance Risk System (SPRS) that is at or above the level specified in the solicitation.

Contractors must identify the unique identifiers (UIDs) for every information system utilized to process, store, or transmit Federal Contract Information (FCI) or Controlled Unclassified Information (CUI), and they must maintain that information in SPRS.

Conditional Status and Subcontractor Oversight

The DoD recognizes that achieving certification may take time, especially for Level 2 or 3. They have introduced the concept of conditional CMMC status. Contractors who have not yet achieved final certification may receive conditional status for up to 180 days while they work to close outstanding items identified in an approved Plan of Action and Milestones (POA&M). Once those items are successfully remediated, the status becomes final.

Prime contractors bear significant responsibility. They must ensure that their subcontractors maintain the same level of compliance when subcontract performance involves the handling of FCI or CUI. The final rule requires the flowdown of the DFARS clause to all such subcontracts, mandating that subcontractors also post their CMMC assessment results and affirmations of continuous compliance in SPRS.

Note: The rule applies only to systems that process, store, or transmit FCI or CUI and does not extend to contracts solely for commercially available off-the-shelf (COTS) items.

Essential Steps Contractors Must Take Now

With the November 10 deadline fast approaching, contractors must take proactive steps:

Perform a Gap Analysis: Map out all systems that handle FCI or CUI and compare current CMMC status against the levels expected in upcoming solicitations.
Ensure SPRS Readiness: Verify that self-assessments or certifications are properly recorded, UIDs are correct, and the “affirmation of continuous compliance” is updated.
Plan for Conditional Status: If immediate full compliance is not feasible, use the conditional status window wisely by submitting and closing POA&Ms in a timely fashion.
Strengthen Subcontractor Oversight: Require upstream subcontractors to provide their CMMC status, confirm flowdown compliance, and build auditing or verification into your internal processes.
Budget for Compliance: Smaller firms, in particular, should anticipate potential investment in cybersecurity controls, assessments, and internal processes required to meet these new obligations.

Key Decisions Shaping Contract Enforcement

Recent court rulings provide clarity on procurement justification and contract termination.

Sole-Source Urgency Not Justified

In the case of GovCIO, LLC v. United States, the Court of Federal Claims reviewed the Internal Revenue Service’s award of a sole-source “Scanning as a Service” bridge contract. The IRS attempted to rely on a Limited Sources Justification (LSJ) under the Federal Acquisition Regulation (FAR), invoking the “urgent and compelling” exception.

The court found the LSJ improper, concluding that it did not provide a rational, contemporaneous explanation linking the asserted urgency—tied to broader payment-modernization directives—to the specific need for a noncompetitive award for digitizing incoming returns. The court required the IRS to supplement its justification.

NASA Upheld in Contract Termination Dispute

The Court of Federal Claims also granted summary judgment for NASA in Spectre Corporation v. United States. The dispute centered on a Space Act Agreement (SAA) established to develop and commercialize silicon-carbide pressure sensor technology.

Under the terms of the SAA, a milestone prepayment was a condition precedent to NASA’s continued performance. When Spectre withheld part of a milestone payment, NASA was consequently excused from further work. The court rejected claims of bad faith and upheld NASA’s termination of the associated patent license based on missed progress reporting and proper notice.

Tags: Government Contracting, Cybersecurity Maturity Model Certification, CMMC, DFARS, Department of Defense, DoD, Federal Contractors, Sole Source Contracts, Regulatory Requirements, Contract Termination, Federal Acquisition Regulations, FAR, NASA, Subcontractors, marketus