Winning defense contracts opens the door to lucrative opportunities—but only if you meet the government’s strict compliance requirements. The average U.S. firm spends between 1.3% and 3.3% of its wage bill on compliance, costing $78.7 billion to $239 billion annually. For defense contractors, the stakes are even higher, with rules covering cybersecurity, procurement, data handling, and export controls.
Failing to follow the Code of Federal Regulations and other applicable laws can lead to fines, canceled contracts, and reputational damage. The challenge is clear: How do you stay compliant without slowing your business down?
This article covers the key regulations you need to know, the consequences of non-compliance, and practical strategies to help you stay competitive and secure long-term success.
Key Takeaways
- Compliance with ITAR, EAR, FAR, and DFARS is essential to securing and maintaining contracts.
- The DoD requires cybersecurity measures aligned with NIST SP guidelines to protect sensitive data.
- Non-compliance leads to fines, reputational damage, and operational disruptions.
- Regular audits, employee training, and clear policies ensure compliance and contract eligibility.
What Are the Key Regulatory Requirements to Know as a Defense Contractor?
International Traffic in Arms Regulations (ITAR)
ITAR controls the export and import of defense articles, services, and technical data under the authority of the secretary of defense. These rules appear in various CFR parts and DoDD and DoDI documents.
If your project involves defense information tied to national security, you must ensure proper handling of sensitive items. Mistakes can lead to hefty fines and possible waiver denial from the relevant government agency.
Export Administration Regulations (EAR)
EAR covers dual-use items—goods and technologies with commercial and military applications. The Department of Defense often coordinates with defense agencies, federal agencies, and OSD (Office of the Secretary of Defense) to ensure the proper issuance of guidance. EAR is published in the federal register, and you may find additional information on how it incorporates updates to protect national security interests.
Federal Acquisition Regulation (FAR) & Defense Federal Acquisition Regulation Supplement (DFARS)
FAR outlines procurement standards for all federal agencies. DFARS is the Defense Federal Acquisition Regulation Supplement that applies specifically to the DoD.
These regulatory frameworks define how you bid, negotiate, and perform on government contracts, including any exemption procedures or references to the United States Code (U.S.C) and Code of Federal Regulations. DISA, inspector general offices, and other DoD personnel closely track compliance.
Cybersecurity Requirements
Cybersecurity is paramount for any defense contractor. DoD regulations, DoDD, and DoDI policies highlight the applicability of standards like NIST SP to protect DoD components and service members.
Executive orders published in the Federal Register often outline enhanced data safeguard requirements. Maintaining consistent compliance helps you defend against advanced threats while fulfilling your contract obligations.
What Are the Consequences of Non-Compliance?
Legal & Financial Penalties
Violating DoD instructions or the CFR part addressing your contract can result in monetary fines, contract suspensions, or criminal charges. The U.S.C. sets strict penalties for mishandling defense information, and the inspector general may investigate your organization’s activities.
Damage to Reputation
DoD components and other federal agencies keep a close eye on contractors. If your organization appears in a table of contents summarizing compliance failures in the federal register, you risk losing future contract opportunities and the trust of your clients.
Operational Costs
Non-compliance disrupts business processes, triggers frequent audits, and diverts resources from core tasks. A government agency may impose an additional administrative burden, or you may be forced to make last-minute policy changes to avoid total contract cancellation.
Strategies to Stay Compliant
Internal Auditing & Monitoring
Assess your processes regularly under each CFR part and DoD instruction. This approach identifies weak points before they escalate and ensures alignment with DoDD, DoDI, and any relevant executive order. If you spot an issue, address it promptly to avoid a costly waiver process.
Training & Education
Keep your workforce—especially DoD personnel assigned to your contract—well-versed in cybersecurity, EAR requirements, and any Air Force or OSD guidance. Frequent training sessions build a culture of compliance where service members and staff understand the importance of safeguarding data.
Establish Policies & Procedures
Maintain clear, written guidelines detailing handling procurement tasks, managing sensitive information, and implementing security agency protocols. Your policies should reference the Code of Federal Regulations, the United States Code, and other DoD regulations so that everyone knows how to avoid non-compliance.
How Diamond IT Can Help You Stay Compliant
At Diamond IT, we understand the high stakes of defense contracting. Falling short on DFARS, ITAR, or cybersecurity standards can cost you contracts—and your reputation.
We deliver tailored solutions that secure sensitive data, streamline compliance, and help you confidently navigate complex DoD regulations. From interpreting the latest DoDD and DoDI requirements to strengthen internal safeguards, our team ensures you’re always audit-ready and contract-eligible.
Don’t leave compliance to chance. Contact us today to protect your operations, secure your contracts, and gain the competitive edge trusted by top DoD partners.