ITAR Just Got Real: Why Cybersecurity Compliance Can Make or Break Your GovCon Business

If you're a small government contractor working with defense-related tech, there's a silent compliance killer that could tank your contracts overnight: ITAR. We cut through the noise and make one thing clear—export-controlled data is no longer a “back-burner” issue. It’s front and center in 2025.

Here’s what’s happening, what it means for you, and the steps you should be taking yesterday to stay in the game.

So, What’s the Deal With ITAR?

The International Traffic in Arms Regulations (ITAR) control the export of U.S. defense-related materials—everything from aircraft schematics to software code related to missile guidance. If you touch that kind of data as a contractor, you’re expected to know the rules, follow them exactly, and protect it like national security depends on it. (Because it does.)

Now combine that with Controlled Unclassified Information (CUI), Cybersecurity Maturity Model Certification (CMMC), and the new FAR rules, and what you get is a dense thicket of cybersecurity obligations that overlap and multiply.

Here’s where it gets critical: ITAR data on your servers (or in the cloud) is almost always also classified as CUI. That means DoD contractors must follow DFARS 252.204-7012—and possibly NIST SP 800-171—on top of ITAR rules. This isn’t optional. It’s baked into your contracts, and failure could mean fines, disbarment, or even criminal penalties.

Why Small Businesses Should Pay Attention

If you’re pursuing 8a contracts services, looking into disabled veteran government contracts, or trying to expand with SBIR Grant Assistance, chances are high you’ll be asked about ITAR and data handling.

Small firms often assume ITAR doesn’t apply to them—but with so much work moving to software, cloud systems, and remote collaboration, that’s a dangerous assumption.

Here’s how it hits home:

• Access Control: ITAR data must be shielded from foreign nationals, including your own staff or overseas subcontractors.

• Cloud Compliance: Storing ITAR data with providers that use foreign employees or servers can violate ITAR—even without an “export.”

• Subcontractor Risk: You’re responsible for everyone in your data supply chain, not just your internal team.

• Licensing Failures: Exporting data—even through email or collaboration tools—without a DDTC license? That’s a violation.

What You Should Do Today (Not Tomorrow)

Think of this as your starter roadmap to avoid an audit nightmare:

• Audit Your Data
  Start by identifying and classifying what you handle: is it FCI, CUI, CDI, or export-controlled (ECI/ITAR)? This will shape your compliance obligations.

• Secure Your Cloud
  If you’re using cloud platforms, make sure they’re FedRAMP-compliant and fully within U.S. jurisdiction. No foreign nationals should have back-end access unless licensed.

• Implement Access Control
  Restrict ITAR-related data to U.S. persons. This includes remote teams, third-party developers, and even interns.

• Train Your Team
  Everyone handling sensitive data should understand the stakes. Build in ITAR awareness into your onboarding and annual compliance training.

• Document Everything
  Keep records of who accessed what, when, and for what purpose. This is critical for audits, incident response, and due diligence with teaming partners.

• Review FAR & DFARS Clauses
  Look out for key clauses like DFARS 252.204-7012, 252.225-7048 (Export-Controlled Items), and FAR 52.204-27 (TikTok ban) in your contracts—they often include hidden landmines.

The Big Picture: ITAR Is a Litmus Test for Readiness

In 2025, agencies are under pressure to enforce cybersecurity rigor across the board. The CMMC rollout, stricter interpretations of the Government contracting certification process, and renewed attention to supply chain security mean that even micro-sized GovCons need to act like prime contractors.

Whether you’re applying for women owned small business certification, navigating the government contracting certification process, or writing proposals with export implications, cybersecurity and ITAR are no longer “nice-to-haves.” They’re make-or-break.

Want More on the Data Security Side of Federal Contracting?
Check out our related post:Top NAICS Codes for Small Business Federal Contracts in FY2025 (So Far),  a must-read for anyone looking to align their certifications and NAICS strategy with secure opportunities.

If you aren't a Squared Compass partner, what are you waiting for? From getting your business set up with specific government set aside programs at both the State and Federal level, to being empowered by a Fractional Capture team to win government contracts, to receiving tailored government contract opportunities Squared Compass delivers immense value which helps propel our partners to success. Schedule a chat with our team today.