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A Comprehensive Look at the FAR CUI Rule: What You Need to Know

In today’s increasingly interconnected world, safeguarding sensitive government data is a top priority for federal agencies—and for the contractors they partner with. While classified information has long been protected through well-established regulations, a new category of “Controlled Unclassified Information” (CUI) has emerged in recent years, prompting additional guidance and compliance requirements. Enter the Federal Acquisition Regulation (FAR) rule for CUI.

In this blog post, we’ll explore what CUI is, why it matters to government contractors, and how the FAR rule on CUI will shape compliance requirements going forward.

1. What is Controlled Unclassified Information (CUI)?

Controlled Unclassified Information (CUI) refers to sensitive but unclassified government information that requires specific handling and safeguarding measures. Prior to the establishment of the CUI program, agencies used a patchwork of labels— “Sensitive But Unclassified (SBU),” “For Official Use Only (FOUO),” and various others—to mark data requiring special handling. This decentralized approach created confusion among government organizations and contractors as to what was considered sensitive, how it should be protected, and under what authorities.

In 2010, Executive Order 13556 formalized the CUI framework, designating the National Archives and Records Administration (NARA) as the CUI Executive Agent. Through the CUI Registry and implementing directives, NARA is responsible for establishing consistent policies and procedures for identifying, marking, and safeguarding CUI across all federal agencies.


2. Why a FAR Rule for CUI?

a. Establishing Government-Wide Consistency

The FAR rule for CUI is intended to provide uniform guidance to ensure that anyone handling sensitive government data—particularly federal contractors—follows the same baseline protection protocols. This consistency reduces confusion and potential security gaps, ensuring that key information is protected across agencies and their supply chains.

b. Meeting Evolving Threats

Cybersecurity threats continue to evolve rapidly, and adversaries are increasingly targeting government systems as well as contractor networks. Data breaches have significant national security and economic implications. By establishing clear requirements under the FAR, the government aims to raise the bar for all contractors—large and small—in safeguarding sensitive data.

c. Aligning with Existing Regulations

You may have already encountered the Defense Federal Acquisition Regulation Supplement (DFARS) cybersecurity clauses (e.g., DFARS 252.204-7012) addressing Covered Defense Information (CDI) and requiring compliance with NIST SP 800-171. While DFARS applies specifically to the Department of Defense (DoD), the new FAR rule for CUI will similarly impact civilian agencies and create a unified standard, likely referencing the same NIST cybersecurity frameworks and best practices.


3. Key Components of the FAR CUI Rule

While the final text may continue to evolve, here are the essential components contractors can expect from the forthcoming (or newly issued) FAR rule:

  1. Definitions and Scope
    The rule will offer clear definitions regarding what constitutes CUI, how it should be identified, and the various categories it encompasses (e.g., personally identifiable information, proprietary data, law enforcement sensitive information, export-controlled information, etc.).
  2. Required Safeguarding Measures
    As with DFARS, the FAR rule is widely expected to reference NIST SP 800-171 as the baseline for cybersecurity controls. Contractors will need to implement specified security measures, policies, and procedures to protect CUI.
    • Implementation Cost Estimates (NIST SP 800-171): While costs vary based on an organization’s size, complexity, and current cybersecurity posture, the FAR CUI Rule estimates the costs for implementing NIST SP 800-171 safeguards and controls as:
      1. Small Businesses - $175,700 (148,200 labor cost plus 27,500 on hardware/software)
        1. Estimated maintenance (recurring) annual costs – $103,800 ($98,800 labor cost plus $5,000 on hardware/software)
      2. Non-Small Businesses (as stated in the proposed rule) - $683,400 ($543,400 labor cost plus $140,000 on hardware/software)
        1. Estimated maintenance (recurring) annual costs - $574,000 ($494,000 labor cost plus $80,000 on hardware/software)
  3. New Standard Form (SFxxx)
    One noteworthy addition tied to the FAR CUI rule is the new Standard Form (SFxxx) (placeholder numbering until officially finalized). This form is expected to standardize how contracting officers and contractors communicate the presence of CUI within contracts, subcontracts, and other related documents.
    • The form will likely outline required markings, distribution statements, and handling instructions for CUI.
    • Contractors should be prepared to update their internal processes to ensure that any relevant contract documentation includes or references this SFxxx, serving as a consistent mechanism for identifying and safeguarding CUI.
  4. NIST SP 800-172 Requirements
    In addition to basic NIST SP 800-171 controls, NIST SP 800-172 provides enhanced security requirements for protecting CUI in critical programs and high-value assets. Under the new FAR rule, some contractors, especially those working on more sensitive or high-priority contracts, may be required to meet these additional measures.
    • Cost Estimates (NIST SP 800-172): Because it introduces more advanced controls (e.g., continuous monitoring, enhanced access controls, and threat intelligence integrations), implementing NIST SP 800-172 can be significantly more expensive than baseline 800-171 compliance. The FAR CUI proposed rule estimates the cost for implementing NIST 800-172 (which is in addition to NIST 800-171 costs) at:
      1. Small Business (25-50 endpoints) - $202,500
      2. Medium Business (50-100 endpoints) - $1,000,000
      3. Large Business (750-1500 endpoints) - $ 2,315,000
    • Maintenance Cost Estimates: The FAR CUI Rule indicates that the maintenance cost of a NIST 800-172 implementation will be around 20% of the implementation cost annually. These costs are expected to include software licenses, hardware and associated licenses, outsourcing costs, and internal resources.
  5. Incident Reporting Requirements
    In the event of a cybersecurity incident or breach, contractors will likely be required to report the details within a specified timeframe (often within 72 hours). This requirement typically includes disclosing the nature of the incident, the type of data compromised, and the steps taken to contain and remediate the breach.
  6. Flow-Down Clauses
    Contractors and subcontractors at all tiers will be required to flow down certain CUI-related requirements. Ensuring that your entire supply chain is compliant is essential. Prime contractors should be ready to share guidelines and verify that subcontractors meet the FAR’s safeguarding and reporting obligations.
  7. Marking and Handling
    The rule will provide guidelines for properly marking documents and digital files containing CUI. Contractors will need to ensure that all personnel who handle such data receive adequate training on labeling and safeguarding procedures.
  8. Penalties for Noncompliance
    As with most FAR-based requirements, failure to comply could lead to contractual remedies or other legal and financial consequences, including the possibility of contract termination, suspension, or damages. Demonstrable, proactive compliance efforts are critical to avoiding such penalties.

4. How the FAR CUI Rule Impacts Contractors

  1. Contractual Obligations
    When bidding on or executing federal contracts that involve sensitive data, contractors will see new clauses referencing FAR CUI requirements. This creates additional responsibilities in terms of documentation, cybersecurity investment, and regular compliance checks.
  2. Supply Chain Requirements
    Because safeguarding efforts are only as strong as the weakest link, prime contractors must ensure their subcontractors meet the same safeguarding and reporting requirements. This can mean establishing compliance frameworks and contractual flow-downs across the entire supply chain.
  3. Increased Oversight
    Contractors can expect closer government scrutiny of their information systems, policies, and processes. This may include audits, self-assessments, or third-party certifications to demonstrate compliance with NIST SP 800-171, NIST SP 800-172 (if required), and other relevant standards.
  4. Resource and Budget Considerations
    Achieving compliance often involves investing in IT infrastructure, security tools, training, and process updates. Smaller companies may face budgetary challenges, but these costs are increasingly viewed as necessary to remain eligible for certain federal contracts.
    • Balancing Costs and Value: Although initial investments can be significant, these enhancements to your organization’s security posture not only meet FAR requirements but also reduce the risk of data breaches and bolster trust with government customers.

5. Tips to Prepare for CUI Compliance

  1. Conduct a Readiness Assessment
    Evaluate your organization’s existing cybersecurity posture against NIST SP 800-171 (and, if applicable, NIST SP 800-172). Identify gaps and develop a roadmap to address them.
  2. Create or Update Policies and Procedures
    Ensure that you have documented policies on incident response, access control, risk management, and employee training. These should be living documents, regularly reviewed and updated to align with evolving threats and regulations.
  3. Implement Strong Access Controls
    Limit user privileges to only what is necessary for each role. Multi-factor authentication (MFA) and strict password policies are essential for protecting CUI.
  4. Train Your Workforce
    CUI compliance isn’t just an IT responsibility—it extends to everyone handling sensitive data. Provide ongoing training on data handling, phishing threats, and best practices for cybersecurity.
  5. Engage with Subcontractors Early
    If you work with suppliers or subcontractors, communicate expectations regarding CUI protections up front. Provide resources, or direct them to official guidance, to help them meet the same requirements.
  6. Stay Informed
    Keep an eye on updates to the FAR rule, including official announcements about the new Standard Form (SFxxx) and any associated changes. Compliance requirements can evolve as the government refines its approach.

6. Looking Ahead

As cyber threats continue to rise and federal agencies seek higher degrees of standardization, the FAR CUI rule will play an increasingly central role in government contracting. Organizations that handle CUI must be prepared to meet stringent security controls and demonstrate their commitment to protecting federal data. Although these requirements may pose new challenges, they also present an opportunity to bolster your company’s overall security posture, reduce risk, and build trust with government customers.

The best course of action? Proactivity. Begin assessing your organization’s readiness now, budget for the necessary cybersecurity enhancements, and stay attuned to the final details of the FAR CUI rule as they emerge. By acting decisively, you can reduce the risk of noncompliance and position your company for success in the federal marketplace.


Final Thoughts

The FAR CUI rule underscores the government’s commitment to protecting sensitive information in an era where data breaches can have severe national security and economic consequences. For contractors, the key is to understand the rule’s components, assess current practices, and stay engaged with evolving guidance—especially regarding NIST SP 800-171, NIST SP 800-172, and the new Standard Form (SFxxx). While initial compliance efforts and associated costs may be significant, the outcome—enhanced security and stronger relationships with federal customers—is a worthwhile investment.

Disclaimer: This blog post is for informational purposes only and should not be taken as legal advice. For specific guidance related to your organization’s compliance obligations, consult qualified legal counsel or a cybersecurity professional.


 

Jimmy Armour headshot high resJimmy Armour is a cybersecurity and compliance professional specializing in NIST, SOC 2, and CIS GRC frameworks. As a Practice Lead, he guides cross-functional teams to streamline audit processes, strengthen security posture, and meet rigorous regulatory requirements—always staying on the cutting edge of emerging cybersecurity trends.

Outside of his professional pursuits, Jimmy is deeply involved in Harrisburg Young Professionals Sports—playing kickball, dodgeball, and bowling—while also participating in the 247Kickball leagues. Some years even take him to national kickball tournaments. All of which are experiences he finds mirrors the same camaraderie and teamwork that drive his success in the workplace.

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