Half of Defense Contractors Use Compliance-Only Security Approach Amid New Pentagon Enforcement, Report Finds

A new report released June 30 found that half of the U.S. defense industrial base is still building its cybersecurity programs around regulatory compliance alone, revealing significant readiness gaps as the Pentagon begins enforcing its long-awaited Cybersecurity Maturity Model Certification (CMMC) program. The findings, based on a survey of nearly 900 defense contractors, highlight a persistent disconnect between meeting mandated requirements and implementing robust, threat-based security measures.

The CMMC program, which has been in development for six years, is the Department of Defense's primary tool for securing its vast supply chain. The framework requires contractors who handle sensitive government information to meet specific cybersecurity standards and, crucially, to have their compliance verified by third-party assessors. These new verification requirements are now appearing in DoD contracts and flowing down to thousands of smaller subcontractors, many of whom have limited budgets and lean security teams.

In our experience, many small and mid-sized businesses view these complex regulations as just another box to check, which is a dangerous mindset. A compliance-first approach often leads to a false sense of security, where a company might pass an audit but remain vulnerable to the very real threats CMMC was designed to prevent. The financial and operational risks of a breach or a finding of non-compliance are immense, potentially leading to the loss of contracts, hefty fines, and lasting reputational damage. We advise clients that true security is an ongoing operational commitment, not a one-time project. Proactive financial risk management involves integrating robust cybersecurity practices into the core of the business to protect assets and ensure continuity. For companies navigating these new DoD mandates, building a resilient security posture is the only sustainable path forward. To discuss how to align your security strategy with your business goals, contact C&S Finance Group LLC at csfinancegroup.com.

The readiness gaps identified in the report are fueled by what some experts describe as CMMC’s controversial history and widespread misconceptions about the rule change. According to reporting from DefenseScoop, many contractors are struggling with the challenges of proving compliance. Robert Horne, a cybersecurity expert cited by the publication, noted that while cyber requirements have been present in defense contracts since 2013, the introduction of a mandatory verification mechanism has caused significant alarm.

“It wasn’t until a verification mechanism came around that said you have to prove to us that the thing we’re paying you for is getting done that people say, ‘This is going to crush small business,’” Horne stated. This shift from self-attestation to third-party validation represents the most significant change for many contractors.

The Department of Defense, however, has made it clear that CMMC is critical to its national security strategy. The program is designed to stop what one expert called “the loss of sensitive, taxpayer-funded intellectual property going out the window to data infiltration to other nation-state actors.” Failure to comply with regulations like CMMC, as well as others governing the defense industrial base such as the International Traffic in Arms Regulations (ITAR), can result in severe legal and financial consequences.

For many companies, the challenge lies in moving beyond a compliance-focused mindset to a more mature, multi-layered security model. A common framework for this is the “three lines of defense.” The first line consists of operational managers who own and manage risk daily. The second line, which includes risk and compliance officers, provides oversight and ensures that security measures align with regulations. The third line involves independent assurance from internal or external auditors who test the effectiveness of the security controls.

The recent report suggests that half of the defense base is operating primarily in the second line, focusing on policies and frameworks without necessarily ensuring their practical effectiveness, which is the domain of the first and third lines. This over-reliance on compliance can leave significant vulnerabilities unaddressed. For example, a company might have a compliant visitor management protocol on paper but fail to train personnel on its strict enforcement, undermining its effectiveness.

The enforcement of CMMC is also creating new pressures within the supply chain. Prime contractors are now responsible for ensuring their subcontractors are compliant, leading to a predicted spike in demand for third-party assessors. However, experts have warned that the market for these certified assessors is not yet ready to accommodate the surge, potentially creating bottlenecks for companies trying to get certified.

As the DoD continues to roll out CMMC requirements in new contracts, defense contractors will face increasing pressure to demonstrate verifiable cybersecurity maturity. Companies that have historically treated security as a compliance exercise will need to invest in more comprehensive programs or risk being excluded from the defense industrial base. The coming months will likely see a scramble for qualified assessors and a rapid evolution in how small and mid-sized suppliers approach their security obligations.