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The costs of CMMC compliance are widely acknowledged as burdensome; there is little hard data on the average cost per SMB.

What does an organization actually spend on consultants, tools, and payroll hours? And how do those costs impact their margins?

When all the numbers are crunched and pencils sharpened, some smaller contractors may choose to walk away from DoD contracting altogether as they no doubt view it as an unacceptable risk to their continuity.

Should too many contractors exit the defense industrial base (DIB), the ripple effect could dramatically change the ecosystem, reducing competition, driving consolidation, and potentially limiting access to critical innovation at a time when our nation needs it most.

The latter point may be the most concerning, as there has been little analysis of how these eventualities will affect the DIB in a broad economic sense. When the cost of doing business rises, so too will the cost of delivering the product or service. Beyond the impact on the contractor itself, the ripple effect may well put our nation at an economic disadvantage.

CMMC Cost Concerns for SMBs and Smaller Defense Contractors

CMMC compliance can be daunting, even for large, established organizations. Costs can range from thousands to $100K and up for CMMC Level 2 and 3.

DoD estimates are often unrealistic because they don’t account for comprehensive IT overhauls, additional CUI storage needs, and the indirect costs of compliance, including procurement delays, operational overhead, hiring and training compliant staff, and audit fatigue.

Indirect costs tend to get even less attention than direct audit and assessment costs, but these line items are what add up over time.

Ultimately, if projected costs outweigh the benefits, tough decisions will be required. Some subcontractors may choose to walk away from DoD contracting entirely, leaving primes in the lurch as they scramble to replace knowledge and technology essential to their business model.

Perhaps the biggest issue is that we do not have comprehensive, publicly available studies that show how CMMC affects the viability and competitiveness of small/subcontractor firms across multiple contracting cycles. The landscape is nascent, and it’s likely we’ll have that data in a few years, but by then, we will surely have lost a few to the financial quagmire.

Secure Enclave: A Viable Option for Smaller Contractors

Establishing a secure enclave may be the only viable option for small subcontractors, as it can significantly reduce costs and complexity in some situations.

One of the most daunting aspects of protecting CUI is transforming IT systems and infrastructure to house sensitive data in compliant systems. However, for companies whose defense portfolio accounts for only a small portion of their business, a complete migration isn’t always necessary.

A secure enclave establishes a protected zone within the computing environment, isolating sensitive data from other systems and preventing unauthorized access. It is a way to ensure all government-linked data is protected and compliant with DFARS, NIST, and CMMC mandates.

As CMMC enforcement rolls out, noncompliant organizations will be unable to renew lucrative defense and DIB contracts. And while a more comprehensive system overhaul might not be financially viable, a secure enclave could fill the gaps and put CMMC compliance back on the table.

If your SMB is challenged by the issues we outlined today, we invite you to connect with an Essendis expert to learn more about secure enclave.