New Cyber Rules Strain Small Defense Suppliers * Science and Technology Times

New U.S. cybersecurity requirements for defense contractors are prompting some small suppliers to reconsider their participation in military programs.
Companies say compliance costs and unclear standards are creating delays and uncertainty across the supply chain.
The situation emerges as the Trump administration pushes for higher production and a more diverse industrial base.

Compliance Burden Grows Under CMMC

New cybersecurity rules introduced under the Defense Department’s Cybersecurity Maturity Model Certification (CMMC) are reshaping how suppliers engage with federal contracts. The framework, launched last November after years of delay, requires companies to conduct self‑assessments as the first of three compliance levels. A more demanding second level, which includes formal audits, is expected to begin by November. Executives say long waits for audits and confusion over what qualifies as controlled unclassified information have made compliance more difficult.

Contractors are increasingly asking suppliers to meet higher standards even when they do not handle sensitive data. This uncertainty has led some firms to question whether they can continue supporting defense programs. Industry sources note that suppliers are often unsure which documents or components fall under the stricter rules. The lack of clarity has added to the administrative burden at a time when production demands are rising.

High Costs Push Small Firms to Reevaluate

Compliance costs are emerging as a major concern for smaller companies with limited financial flexibility. Industry sources estimate that meeting CMMC requirements can cost hundreds of thousands of dollars per firm. Some businesses that also operate in commercial markets say the growing regulatory load is forcing them to reconsider their involvement in defense work. Margaret Boatner of the Aerospace Industries Association warned that these pressures could weaken the resilience of the industrial base.

Small businesses make up roughly 88% of aerospace firms, according to U.S. House data from 2022. Several aerospace companies told Reuters that some of their suppliers are unwilling to undergo the required audits. One U.S. company president said half of its suppliers have not yet indicated whether they will comply. Another executive, whose firm is the sole source for a fighter jet component, said he remains uncertain about how his suppliers will respond.

Supply Chain Risks and International Challenges

The health of small suppliers is closely monitored by investors after years of production bottlenecks. Many of these firms produce specialized components that larger contractors rely on to assemble weapons and equipment. Legal experts warn that CMMC could unintentionally reduce competition among lower‑tier suppliers. Alex Major, a lawyer advising contractors on compliance, said international firms face additional challenges due to overlapping European and regional data‑privacy laws.

Conflicting regulatory requirements can make it difficult for companies to manage data in a way that satisfies all jurisdictions. A Canadian aerospace executive estimated he would need to spend C$500,000 to meet both U.S. and European cybersecurity standards. Some firms are questioning whether the investment is worthwhile, particularly if defense work represents only a small portion of their business. Pathfinder Manufacturing CEO Dave Trader said he is unsure whether compliance makes sense given strong demand from commercial customers like Boeing.