CMMC 2.0

CMMC Compliance: Who Needs It, What Happens If You Don’t, and How to Fix It

Compliance
October 06, 2025•6 min read

In August 2025, the Department of Defense (DoD) finalized its Cybersecurity Maturity Model Certification (CMMC) Final Rule, making cybersecurity certification a mandatory contractual condition for thousands of defense contractors and subcontractors. Under the new rules, any company handling Federal Contract Information (FCI) or Controlled Unclassified Information (CUI) must meet a defined CMMC level to bid on or retain DoD contracts (Mondaq, 2025).

That raises critical questions: Which companies must comply? What are the consequences of ignoring CMMC? And how can businesses resolve noncompliance before it becomes costly?

Which Companies Must Comply with CMMC

At its core, CMMC applies to the Defense Industrial Base (DIB)—the network of over 300,000 companies that contract with or support the DoD (DoD CIO, 2025).

Prime Contractors and Subcontractors Handling FCI or CUI

If your company processes, stores, or transmits FCI (information provided by or generated for the government) or CUI (sensitive but unclassified data), compliance is mandatory. CMMC requirements apply to both prime contractors and subcontractors in the defense supply chain (DoD CIO, 2025).

The DoD now includes explicit CMMC clauses in contracts that specify which level is required for eligibility (Holland & Knight, 2025).

CMMC 2.0 Levels Based on Data Sensitivity

The CMMC 2.0 framework includes three levels:

  • Level 1 (Foundational): For companies handling only FCI. Requires 17 basic safeguarding practices and an annual self-assessment (DoD CIO, 2025).

  • Level 2 (Advanced): For companies managing CUI. Requires 110 security controls aligned with NIST SP 800-171 and may involve third-party certification (Summit 7, 2024).

  • Level 3 (Expert): For contractors involved with the most sensitive defense projects. Adds advanced controls from NIST SP 800-172 and undergoes government-led assessments (Holland & Hart, 2024).

Some companies providing only commercial off-the-shelf (COTS) products are exempt, but nearly all DoD contractors handling FCI or CUI must comply (The Coalition for Government Procurement, 2024).

CMMC compliance also flows downstream—if a subcontractor handles CUI, they too must achieve the appropriate certification level (Holland & Hart, 2024).

Consequences of Ignoring CMMC Compliance

Ignoring CMMC carries both regulatory risks and can threaten a company’s entire defense contracting business model.

1. Loss of Contract Eligibility

The most immediate consequence of noncompliance is ineligibility for DoD contracts. If a company cannot demonstrate the required CMMC level at contract award, it will be disqualified from bidding. Existing contracts can also be terminated if compliance lapses (Cape Endeavors, 2024).

For businesses whose revenue relies on DoD work, losing eligibility could be devastating.

2. Legal and Financial Liability

Submitting inaccurate or false compliance claims exposes contractors to False Claims Act (FCA) penalties, including fines of up to tens of thousands per violation (InterSec, 2024).

Additionally, failing to implement required cybersecurity controls can result in fines up to $10,000 per control violation, depending on the contract and data involved (Intech Hawaii, 2024).

Remediation after noncompliance is discovered—whether by audit, breach, or contract review—can also be expensive. Mid-sized defense contractors report costs exceeding $250,000 to achieve compliance retroactively (Skyward IT, 2024).

3. Reputational Damage and Competitive Disadvantage

Defense contractors that fail to achieve certification lose credibility with both government agencies and prime contractors. CMMC certification is becoming a competitive differentiator; firms without it are viewed as high-risk vendors and often lose opportunities to certified competitors (CM Alliance, 2024).

4. Heightened Cybersecurity Risk

Without CMMC-mandated controls, such as multi-factor authentication, incident response plans, and audit logging, companies face greater exposure to breaches and insider threats. CMMC isn’t just bureaucracy; it’s a direct defense against data theft, ransomware, and espionage (eTrepid, 2024).

How Companies Can Resolve Noncompliance

Fortunately, organizations can recover from noncompliance by following a structured path toward CMMC readiness. The process requires assessment and expert guidance.

1. Conduct a Gap Assessment

The first step is understanding where your organization stands relative to CMMC requirements. A CMMC gap assessment compares your current security posture against the NIST SP 800-171 controls and CMMC practices. This identifies where controls are missing or improperly implemented.

2. Prioritize Remediation

Once gaps are known, focus on high-impact areas such as access control, network security, incident response, and audit logging. Address these issues first since they represent both compliance and cybersecurity risks.

3. Implement Technical and Administrative Controls

Compliance involves both technology and policy. Organizations must deploy technical safeguards (encryption, MFA, intrusion detection, continuous monitoring) alongside written policies that define responsibilities, processes, and oversight. Staff training and vendor risk management are equally critical.

4. Register and Submit Required Documentation

All contractors must register with the Supplier Performance Risk System (SPRS) and maintain a CMMC Unique Identifier (UID) for each system (White & Case, 2025).

Self-assessments and third-party certification reports are then submitted based on the contract’s required level (Holland & Knight, 2025).

5. Work with Certified Third-Party Assessors

For contracts requiring third-party verification, organizations must engage a Certified Third-Party Assessment Organization (C3PAO). These accredited assessors verify that controls are properly implemented (DoD CIO, 2025).

6. Establish Continuous Compliance

Passing an audit is not the finish line—CMMC requires ongoing adherence. Contractors must perform annual affirmations and continuously maintain security controls. Regular reviews, vulnerability assessments, and staff training ensure compliance does not erode over time (DoD CIO, 2025).

7. Document Everything

Comprehensive documentation including configurations, logs, access reviews, incident reports, and training records must be maintained and easily accessible. This ensures future audits go smoothly and protects against accusations of noncompliance.

8. Engage Expert Support

Many organizations work with Registered Provider Organizations (RPOs) to manage the complexity of compliance. RPOs provide strategic and technical assistance for readiness, remediation, and assessment preparation (Centre Technologies, 2024).

Conclusion

CMMC compliance is now a contractual and strategic imperative for defense contractors and subcontractors. As of 2025, CMMC clauses are being written directly into DoD solicitations, and failure to comply can disqualify companies from future defense work (Faegre Drinker, 2024).

Noncompliance brings not only lost contracts but also financial penalties, potential FCA exposure, reputational damage, and higher cyber risk.

However, with a clear roadmap, beginning with a gap analysis, followed by systematic remediation, third-party assessment, and continuous monitoring, companies can achieve and sustain CMMC certification.

At CCS, we help defense contractors navigate this process efficiently, building compliance programs that protect data, preserve contracts, and strengthen competitive standing. If your organization hasn’t yet begun preparing for CMMC, now is the time to act. The DoD’s cybersecurity expectations are only getting stricter. Noncompliance is no longer an option.

References

compliancecybersecuritybusinessesremediationnoncompliance
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Featured Posts

CMMC 2.0

CMMC Compliance: Who Needs It, What Happens If You Don’t, and How to Fix It

Compliance
October 06, 2025•6 min read

In August 2025, the Department of Defense (DoD) finalized its Cybersecurity Maturity Model Certification (CMMC) Final Rule, making cybersecurity certification a mandatory contractual condition for thousands of defense contractors and subcontractors. Under the new rules, any company handling Federal Contract Information (FCI) or Controlled Unclassified Information (CUI) must meet a defined CMMC level to bid on or retain DoD contracts (Mondaq, 2025).

That raises critical questions: Which companies must comply? What are the consequences of ignoring CMMC? And how can businesses resolve noncompliance before it becomes costly?

Which Companies Must Comply with CMMC

At its core, CMMC applies to the Defense Industrial Base (DIB)—the network of over 300,000 companies that contract with or support the DoD (DoD CIO, 2025).

Prime Contractors and Subcontractors Handling FCI or CUI

If your company processes, stores, or transmits FCI (information provided by or generated for the government) or CUI (sensitive but unclassified data), compliance is mandatory. CMMC requirements apply to both prime contractors and subcontractors in the defense supply chain (DoD CIO, 2025).

The DoD now includes explicit CMMC clauses in contracts that specify which level is required for eligibility (Holland & Knight, 2025).

CMMC 2.0 Levels Based on Data Sensitivity

The CMMC 2.0 framework includes three levels:

  • Level 1 (Foundational): For companies handling only FCI. Requires 17 basic safeguarding practices and an annual self-assessment (DoD CIO, 2025).

  • Level 2 (Advanced): For companies managing CUI. Requires 110 security controls aligned with NIST SP 800-171 and may involve third-party certification (Summit 7, 2024).

  • Level 3 (Expert): For contractors involved with the most sensitive defense projects. Adds advanced controls from NIST SP 800-172 and undergoes government-led assessments (Holland & Hart, 2024).

Some companies providing only commercial off-the-shelf (COTS) products are exempt, but nearly all DoD contractors handling FCI or CUI must comply (The Coalition for Government Procurement, 2024).

CMMC compliance also flows downstream—if a subcontractor handles CUI, they too must achieve the appropriate certification level (Holland & Hart, 2024).

Consequences of Ignoring CMMC Compliance

Ignoring CMMC carries both regulatory risks and can threaten a company’s entire defense contracting business model.

1. Loss of Contract Eligibility

The most immediate consequence of noncompliance is ineligibility for DoD contracts. If a company cannot demonstrate the required CMMC level at contract award, it will be disqualified from bidding. Existing contracts can also be terminated if compliance lapses (Cape Endeavors, 2024).

For businesses whose revenue relies on DoD work, losing eligibility could be devastating.

2. Legal and Financial Liability

Submitting inaccurate or false compliance claims exposes contractors to False Claims Act (FCA) penalties, including fines of up to tens of thousands per violation (InterSec, 2024).

Additionally, failing to implement required cybersecurity controls can result in fines up to $10,000 per control violation, depending on the contract and data involved (Intech Hawaii, 2024).

Remediation after noncompliance is discovered—whether by audit, breach, or contract review—can also be expensive. Mid-sized defense contractors report costs exceeding $250,000 to achieve compliance retroactively (Skyward IT, 2024).

3. Reputational Damage and Competitive Disadvantage

Defense contractors that fail to achieve certification lose credibility with both government agencies and prime contractors. CMMC certification is becoming a competitive differentiator; firms without it are viewed as high-risk vendors and often lose opportunities to certified competitors (CM Alliance, 2024).

4. Heightened Cybersecurity Risk

Without CMMC-mandated controls, such as multi-factor authentication, incident response plans, and audit logging, companies face greater exposure to breaches and insider threats. CMMC isn’t just bureaucracy; it’s a direct defense against data theft, ransomware, and espionage (eTrepid, 2024).

How Companies Can Resolve Noncompliance

Fortunately, organizations can recover from noncompliance by following a structured path toward CMMC readiness. The process requires assessment and expert guidance.

1. Conduct a Gap Assessment

The first step is understanding where your organization stands relative to CMMC requirements. A CMMC gap assessment compares your current security posture against the NIST SP 800-171 controls and CMMC practices. This identifies where controls are missing or improperly implemented.

2. Prioritize Remediation

Once gaps are known, focus on high-impact areas such as access control, network security, incident response, and audit logging. Address these issues first since they represent both compliance and cybersecurity risks.

3. Implement Technical and Administrative Controls

Compliance involves both technology and policy. Organizations must deploy technical safeguards (encryption, MFA, intrusion detection, continuous monitoring) alongside written policies that define responsibilities, processes, and oversight. Staff training and vendor risk management are equally critical.

4. Register and Submit Required Documentation

All contractors must register with the Supplier Performance Risk System (SPRS) and maintain a CMMC Unique Identifier (UID) for each system (White & Case, 2025).

Self-assessments and third-party certification reports are then submitted based on the contract’s required level (Holland & Knight, 2025).

5. Work with Certified Third-Party Assessors

For contracts requiring third-party verification, organizations must engage a Certified Third-Party Assessment Organization (C3PAO). These accredited assessors verify that controls are properly implemented (DoD CIO, 2025).

6. Establish Continuous Compliance

Passing an audit is not the finish line—CMMC requires ongoing adherence. Contractors must perform annual affirmations and continuously maintain security controls. Regular reviews, vulnerability assessments, and staff training ensure compliance does not erode over time (DoD CIO, 2025).

7. Document Everything

Comprehensive documentation including configurations, logs, access reviews, incident reports, and training records must be maintained and easily accessible. This ensures future audits go smoothly and protects against accusations of noncompliance.

8. Engage Expert Support

Many organizations work with Registered Provider Organizations (RPOs) to manage the complexity of compliance. RPOs provide strategic and technical assistance for readiness, remediation, and assessment preparation (Centre Technologies, 2024).

Conclusion

CMMC compliance is now a contractual and strategic imperative for defense contractors and subcontractors. As of 2025, CMMC clauses are being written directly into DoD solicitations, and failure to comply can disqualify companies from future defense work (Faegre Drinker, 2024).

Noncompliance brings not only lost contracts but also financial penalties, potential FCA exposure, reputational damage, and higher cyber risk.

However, with a clear roadmap, beginning with a gap analysis, followed by systematic remediation, third-party assessment, and continuous monitoring, companies can achieve and sustain CMMC certification.

At CCS, we help defense contractors navigate this process efficiently, building compliance programs that protect data, preserve contracts, and strengthen competitive standing. If your organization hasn’t yet begun preparing for CMMC, now is the time to act. The DoD’s cybersecurity expectations are only getting stricter. Noncompliance is no longer an option.

References

compliancecybersecuritybusinessesremediationnoncompliance
Back to Blog

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