Federal government contractors that handle sensitive information could soon face a “sea change” in rules about how they protect that information and report when it has been part of a breach.

Pending federal regulations on the handling of “controlled unclassified information,” or CUI, a category of sensitive data that falls short of classified — including people’s personal information such as Social Security numbers, information that could expose vulnerabilities in critical infrastructure and more — could arrive as soon as the end of this year, but likely no later than the end of President Donald Trump’s term, attorneys who specialize in federal procurement rules said. The changes are part of a larger overhaul of federal contracting rules.

As currently written, the proposed CUI rules mandate that unauthorized access of such data, including as a result of a cyberattack, would have to be reported to the federal government within 72 hours of discovery. The rules are a companion for most federal agencies to existing  Defense Department rules that cover the same subject. The 72-hour notice also is deliberately aligned with forthcoming rules from the Cybersecurity and Infrastructure Security Agency (CISA) for critical infrastructure owners and operators to report major cyber incidents under the Cybersecurity Incident Reporting for Critical Infrastructure Act (CIRCIA).

The CUI rules require contractors to adhere to minimum electronic security standards for protecting that sensitive information. Experts said the rules could expose contractors who fail to comply with cybersecurity guidelines to penalties under the False Claims Act, a lever that the federal government has been using increasingly since 2022 to punish contractors over lackluster cyber safeguards.

It’s “going to be a sea change for a lot of companies,” said Trayce Howard, a government contracts partner at Wiley Rein. 

“If it’s finalized in the form that it’s in now, it will be a fairly significant change for federal contractors,” said Ryan Burnette, a partner at Covington focused on government contracts and technology.

Susan Cassidy, another partner at Covington who advises government contractors, said the proposed regulation is part of a journey that began as far back as an executive order in 2010, when officials realized they couldn’t have sufficient, consistent requirements for protecting CUI given that so many agencies used different terminology for it: “sensitive but unclassified,” “for official use only,” and more.

The proposed rule is intended to “make it easier for contractors to comply with one set of standards, rather than many different types of standards” for the protection of CUI and the reporting on CUI incidents such as breaches, she said.

One industry source who spoke on condition of anonymity was candid about the difficulties CUI poses.

“CUI can be painful for many industry stakeholders because it’s not always clear what constitutes CUI,” the source said. “Many contractors will say they don’t necessarily know exactly what CUI is, despite their best efforts. Information from agencies isn’t always clearly marked as CUI.”

The reporting requirements

An earlier draft of the rule gave industry groups more heartburn: It had an 8-hour standard for reporting CUI incidents, rather than 72, and it required reporting of suspected incidents as well.

Still, a number of industry groups objected to the 72-hour standard, despite it being part of a much-sought after attempt to align federal breach reporting notification standards under CIRCIA.

The Aerospace Industries Association, for instance, said in filed comments that it “reiterates concerns with these compressed timelines which will be difficult and costly for industry to comply with,” in reference to the 72-hour standard. “AIA recommends extending these timelines to 30 calendar days to accommodate improved reporting while reducing compliance costs.”

The industry source said that “72 hours is largely a policy decision, based on extensive public-private deliberation,” rather than one based on any study of what’s best.

Another point of discussion about the reporting rule as written is where contractors report incidents.

“While the 72-hour reporting window is a significant improvement over the 8-hour window in the January 2025 proposal, the June 2026 rulemaking still appears to require reporting to agency -specific points of contact … rather than to a single centralized hub,” the Chamber of Commerce wrote in its comments.

Cassidy said “it will be interesting to see how centralized reporting into CISA, which is the other place where civilian agencies go, is handled, and whether there’s coordination with DOD or whether or not we still see two separate streams going through.”

The standards

The other major aspect of the proposed rule is that contractors handling CUI would have to abide by certain cybersecurity standards set by the National Institute of Standards and Technology known as SP 800-171, which Howard and her Wiley coauthors said would be imposed “on a broader group of contractors than ever before.” Some contractors might also have to meet other cybersecurity requirements, too.

“Another thing that will affect contractors is they’re going to have to flow down these requirements to their subcontractors,” she said. “So they’re going to have to identify what CUI am I giving to my subcontractors, and do some sort of oversight to make sure that their subcontractors are appropriately handling CUI.”

Howard and other experts predict that the rules could expand who might be subjected to False Claims Act punishments.

“I do think that this creates some significant False Claims at risk for contractors,” she said. This is going to encompass a whole new universe of contractors that may not be quite ready for that… contractors that have been working for civilian agencies exclusively have not been subject to this before.”

Final steps

The next steps aren’t 100 percent clear. Howard said a final rule could arrive by the end of the year. Cassidy said either an interim rule could take effect soon, or a final rule could be issued. Burnette said a final rule might be farther away, though the Trump administration has made it clear it wants everything finalized before the end of its term.

That means contractors need to get ready, he said.

“I think contractors should really be looking at this, preparing for it in certain ways, at least by recognizing at a high level, where this is headed and the types of activities and steps they need to be doing internally,” Burnette said. “Some of the minutia and the details, those are still subject to ironing out. But generally speaking, if you look at this rule compared to the rule that we saw early last year, they are much more similar than they are different. So we are starting to see  some crystallization here of the requirements, and we’re starting to get an idea what might change and what is most likely baked at this point.”

The Office of Management and Budget did not respond to requests for comment.

The post Major rules for federal contractors handling sensitive data are nearing the finish line appeared first on CyberScoop.

Industry groups who spoke at town halls hosted by the Cybersecurity and Infrastructure Security Agency about a pending cyber incident notification regulation had a few consistent messages:

We want this to apply to fewer of us. We don’t want to report to you on as many incidents. We want to give you less information when we do. 

CISA last week published transcripts from the town halls, where the agency sought feedback on the delayed rule for the 2022 Cyber Incident Reporting for Critical Infrastructure Act — perhaps the most significant cyber legislation Congress has ever passed. That law required critical infrastructure owners to report major cyberattacks to the federal government within 72 hours, and ransomware payments within 24 hours.

The law was designed to let the feds share information about significant incidents more widely to prepare other would-be victims. CISA published a proposed rule on the law in 2024 to define terms like “covered cyber incident” and more, and industry groups have persistently registered their objections since then.

CISA missed the October 2025 deadline for finalizing the rule, then missed a May reset target date, and now the administration says the rule will be completed in September.

Some industry sources told CyberScoop they consider that unlikely. Most also haven’t received any indications from CISA about how much of the town hall feedback it intends to embrace, they said.

Companies, incidents, information 

Those town hall comments over the course of four June dates were often very direct.

“The rule includes too many companies,” said Grant MacIntyre, director of regulatory affairs and senior attorney at the Auto Care Association. CISA estimated that more than 300,000 entities will be subject to its requirements.

Some industries advocated for their removal entirely, such as two different groups representing elements of the insurance sector. Some sought to reduce the number affected within their sector, such as the Nuclear Energy Institute wanting the list cut down to those already subject to Nuclear Regulatory Commission cybersecurity reporting requirements.

While CISA wrote the regulation with the intention to avoid overburdening small businesses, some feared it wouldn’t work that way in practice.

“The current approach where an entity qualifies either by size or by sector effectively negates the intended limitation on small businesses,” said Douglas Leigh, vice president of legislative affairs for the Alliance for Chemical Distribution. “In chemical distribution, even small entities could be swept in under multiple cyber categories.”

Where the rule specifies what kind of data organizations should report in a major incident, CISA should “seek to collect the least amount of information possible in the easiest to report fashion to facilitate information accuracy and reporting speed,” said Samantha Burch, vice president of technology public policy at government affairs at AHIP, a health insurance industry trade association.

Many, for instance, argued the report should not include information on the affected entities’ security measures.

Others worried about what kind of incidents would trigger reporting requirements.

“My big concern is that you’re going to be asking us to report incidents on every time some foreign entity tickles our firewall, whether they do anything or not, if they just do a ping or a search,” said Tim Pospisil, chief security officer for Nebraska Public Power District. “And that could be extremely burdensome.”

Industry Expectations

One industry representative told CyberScoop that CISA’s willingness to hold town halls, combined with the Trump administration strategy emphasizing “common sense regulation,” was a good sign about where the rule might be heading.

‘They are not picking up on the Biden administration’s approach and tweaking it. They’re thinking, ‘What are the specific pieces of information we need during a cyber incident to help critical infrastructure companies respond?’” said Henry Young, senior director of policy for the Business Software Alliance. “In general, industry is optimistic that what we’ll end up with are a few of the most important pieces of information, so that in the emergency, companies can act quickly and actually respond to an incident rather than completing lots of paperwork.”

But multiple industry sources said they haven’t gotten many indications about CISA’s intentions. Nor are they optimistic CISA can meet the September target date in the Unified Agenda of Regulatory and Deregulatory Actions.

“It could slip,” one said. “But I think they’re going to try.”

That industry source said they’d like to see a proposal from CISA before it cements anything forever.

Another industry source said it’s hard to trust the September date given past CISA delays, some of which aren’t CISA’s fault, such as dealing with multiple government shutdowns. Some of the delays trace to the Trump administration, given the massive cuts to CISA’s personnel.

Congress is also getting impatient.

The House Appropriations Committee “is concerned about delays in publishing the final CIRCIA rule and urges CISA to finalize it promptly following stakeholder review and feedback,” the panel wrote in the committee report for its fiscal 2027 Department of Homeland Security spending bill.

It’s a much different world than when CISA began writing the rule, something the agency also has to take into account now.

“AI has fundamentally changed the playing field,” the source said. “When this was set up, we didn’t even have the first generation of ChatGPT. We’re now in a mythos class environment.” That’s changed “how quickly we can identify threats, mitigate them, the level of human intervention, potential machine engagement.”

While CISA might have good intentions, past interactions give cause for skepticism about how capable it is of working collaboratively with industry, the source said.

Another industry source said conversations with CISA suggest the agency will look to simplify the regulation to keep it smaller and narrower, then potentially build upon it later.

From CISA’s mouth

Nick Andersen, the acting director of CISA, talked about his overarching intentions with CIRCIA at the town halls.

“CISA does not view CIRCIA as simply a check-the-box compliance exercise,” Andersen said at one. “CIRCIA will enhance visibility into the cyberthreat landscape to enable a robust national early warning capability for critical infrastructure. By quickly reporting covered cyber incidents and ransom payments to CISA, we will be able to provide timely and actionable defensive and eviction measures to your network defenders.”

Asked by CyberScoop about next steps for CIRCIA, and how it might incorporate the industry feedback, a spokesperson provided a statement.

“CISA recognizes the importance of CIRCIA, however, multiple funding lapses impacted CISA’s ability to conduct rulemaking activity for CIRCIA. CISA continues to work on the final rule,” the spokesperson said, adding that 1,200 critical infrastructure stakeholders attended the town halls.  “CISA will continue to communicate updates on the CIRCIA rulemaking process and timeline through CISA.gov/CIRCIA and the Office of Information and Regulatory Affairs’ Unified Agenda of Regulatory and Deregulatory Actions.”

The post Industry’s message on CIRCIA: Please ask us fewer questions about cyberattacks appeared first on CyberScoop.

Seven out of 10 federal cyber regulations requiring written reports to federal agencies are duplicated elsewhere, a report from a government watchdog found in a report to Congress Wednesday.

And so far, efforts to de-conflict haven’t had much success, the report from the Government Accountability Office concluded.

At the request of two top lawmakers, the GAO examined federal cyber regulations at 37 agencies. It counted 80 out of 117 rules that “either contain the same kind of reporting requirement applicable to a sector or the same reporting requirement as at least one other regulation.”

The desire to harmonize those conflicting rules gathered steam under the Biden administration, as it undertook a more aggressive push to regulate cybersecurity than prior administrations. It has continued into the second Trump administration.

The GAO scrutinized regulations that required the private sector to report cybersecurity incidents, plans and reviews to federal agencies, as part of a study sought by House Homeland Security Chairman Andrew Garbarino, R-N.Y., and the top Democrat on the Senate counterpart to Garbarino’s panel, Gary Peters, D-Mich.

In some cases, a single critical infrastructure sector could have duplication with several agencies. For example, the Cybersecurity and Infrastructure Security Agency has been working on a regulation stemming from the 2022 Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA), which would require critical infrastructure owners and operators to report when they are the victims of major attacks or make ransomware payments.

Elements of the financial services sector might fall under one of 15 preexisting cybersecurity reporting rules, depending on the agency that has oversight, but they may also be subject to the pending CIRCIA rules, GAO noted.

A 2024 national security memorandum tasked the Office of the National Cyber Director and the Department of Homeland Security to harmonize conflicting regulations, and both agencies made some progress on those goals.

But the executive branch paused some of those efforts after Trump issued an executive order in March of last year while the administration conducted a study of the 2024 memo, a study that was still underway as of last month, according to the GAO.

As such, on harmonization, “many past federal efforts have experienced delays and made limited progress,” the GAO concluded in its report Wednesday, its latest on the topic. 

Congress has also looked at ways to streamline cybersecurity regulations.

GAO’s study was focused only on federal rules. BreachRx, a cyber incident response firm, published its own report Wednesday looking at major cyber incidents and how overlapping regulatory reporting obligations came into play, folding in regulations from states and other sources.

The post Most federal cybersecurity reporting rules are duplicative, study finds appeared first on CyberScoop.