Policy and Procedures

To meet the FedRAMP Moderate “Policy and Procedures” requirement (NIST SP 800-53 Rev 5 SR-1), you must create, formally approve, and distribute a supply chain risk management (SCRM) policy and supporting procedures that clearly define purpose, scope, roles, responsibilities, leadership commitment, coordination points, and compliance expectations ¹. Operationalize it by assigning ownership, embedding it into third-party onboarding and change workflows, and retaining evidence that people follow it.

Key takeaways:

• SR-1 expects documented SCRM policy and procedures, not a single PDF that no one uses ¹.
• Examiners look for clear roles, coordination across teams, and proof the policy is disseminated and followed ¹.
• Treat “compliance” as measurable obligations: required steps, approvals, exceptions, and retained artifacts ¹.

SR-1 is a governance control with teeth: it forces you to translate supply chain risk management from general intent into executable, repeatable workflows. For FedRAMP Moderate programs, this is where many organizations fail quietly. They write a SCRM policy once, file it, and continue onboarding third parties and software with inconsistent checks, ad hoc approvals, and scattered evidence.

A CCO or GRC lead should read SR-1 as a documentation-and-execution requirement. “Develop, document, and disseminate” means you need approved documents, distribution to the right audiences, and a way to show that the organization actually runs the procedures in day-to-day operations ¹. The required content list (purpose, scope, roles, responsibilities, management commitment, coordination, compliance) is also a checklist for what auditors will test: who owns SCRM, who must participate, what is mandatory, and how exceptions work.

This page gives you requirement-level implementation guidance you can put into motion immediately: what to write, who signs, how to wire it into third-party and system lifecycle processes, and what evidence to retain for a FedRAMP assessment.

Regulatory text

Requirement (SR-1): “Develop, document, and disseminate a supply chain risk management policy and procedures that address purpose, scope, roles, responsibilities, management commitment, coordination, and compliance.” ¹

Operator interpretation: You must produce (1) an SCRM policy and (2) supporting procedures, get them approved, distribute them to the teams that execute SCRM, and be able to demonstrate the documents cover the listed topics and are followed in practice ¹.

Plain-English interpretation (what SR-1 really demands)

SR-1 asks for a management system, not prose. The policy sets the rules of the road (mandatory requirements and governance). The procedures describe the repeatable steps that teams follow to manage supply chain risk across third parties, software, and services that can affect the FedRAMP system boundary.

If your organization can’t answer these questions quickly, you likely have an SR-1 gap:

• Who is accountable for SCRM outcomes and who executes the checks?
• Which third parties and components are in scope, and when do you reassess them?
• What must happen before onboarding, before renewal, and before material changes?
• How do Security, Legal, Privacy, Procurement, Engineering, and the business coordinate?
• What happens when a team wants to bypass a requirement?

Who it applies to (entity and operational context)

In scope entities: Cloud Service Providers pursuing or maintaining FedRAMP Moderate authorization, and federal agencies implementing FedRAMP-aligned controls for systems and acquisitions ¹.

Operational context where SR-1 shows up:

• Third-party onboarding (SaaS, hosting, MSPs, SOC support, data processors, subcontractors)
• Software and component intake (commercial software, open-source dependencies, container images, libraries)
• Procurement and contracting (security addenda, flow-down clauses, subcontractor controls)
• Change management (new integrations, new data flows, new hosting regions, replacement vendors)
• Incident response (supplier-caused incidents, notification duties, coordinated containment)

What you actually need to do (step-by-step)

1) Name the owner and decision forum

• Assign an SCRM Policy Owner (often Security/GRC) and an Executive Sponsor who can enforce priorities across Procurement and product teams.
• Establish a cross-functional SCRM coordination group (can be a standing meeting or a routed approval workflow) with Security, Legal, Privacy, Procurement/Vendor Management, and the system owner.

Deliverable: RACI matrix (Accountable/Responsible/Consulted/Informed) mapped to key SCRM activities.

2) Write the SCRM policy (keep it short, enforceable, testable)

Your policy should include, at minimum, the SR-1 required elements ¹:

• Purpose: Why the policy exists (manage supply chain risks to confidentiality, integrity, availability).
• Scope: Systems, business units, third parties, and component types covered; include explicit inclusion of subcontractors where relevant.
• Roles and responsibilities: System owner, procurement, security, legal, privacy, vendor owners, engineers.
• Management commitment: Executive sponsor statement, resourcing expectations, enforcement authority.
• Coordination: Required handoffs (e.g., Procurement cannot sign without Security review for defined risk tiers).
• Compliance: Mandatory steps, required approvals, exception process, consequences for noncompliance, and recordkeeping requirements.

Practical drafting rule: Every “must” should map to an artifact you can produce later.

3) Build procedures that match your operating model

Procedures are where auditors see “real.” Create procedures for:

• Third-party due diligence: intake, risk tiering, security review, privacy review, contract controls, and final approval.
• Ongoing monitoring and reassessment: triggers for review (renewals, incidents, material changes).
• Software/component intake: approval gates for new libraries/images, provenance checks, and escalation paths.
• Exception management: how to request, who approves, time-bounding, and compensating controls.
• Offboarding: access revocation, data return/destruction evidence, and termination checklist.

Tip: Mirror your tooling. If work runs through ticketing, your procedure should reference the ticket types, required fields, and approver routing.

4) Embed the procedures into workflows (make noncompliance hard)

• Add gates in procurement and onboarding: no PO/contract execution without a completed due diligence package for in-scope third parties.
• Add change triggers: when Engineering adds a new integration or subprocessors are added, the workflow forces a risk review.
• Create standard contract language and a required security addendum checklist that aligns to your SCRM requirements.

Daydream fit (earned mention): If your team struggles to keep intake questionnaires, reviews, approvals, and evidence consistent, Daydream can centralize third-party due diligence workflows, approvals, and evidence retention so SR-1 “dissemination and compliance” is demonstrable during assessment.

5) Disseminate and train (prove it happened)

“Disseminate” is testable. Maintain:

• Publication location (policy portal/wiki/GRC system)
• Targeted communications to impacted teams (Procurement, Engineering, Product, Legal)
• Training or enablement materials for people who execute the procedures

6) Prove compliance with a recordkeeping model

Define, in the procedure, what records are retained, where, and who owns retention. Make it easy to pull a complete package for any third party or component.

Required evidence and artifacts to retain

Retain artifacts that show both existence and operation:

Policy-level

• Approved SCRM policy with version history and approval record
• Documented roles/responsibilities (RACI) and coordination model
• Exception standard and approval authority list

Procedure-level

• Written procedures for due diligence, monitoring, exceptions, offboarding
• Templates/checklists (intake form, risk tiering rubric, contract checklist)

Operational evidence (sample-based is fine, but be consistent)

• Third-party onboarding packages: risk tier, security review notes, approvals, contract/security addendum, identified issues and remediation
• Exception tickets: request, compensating controls, approval, expiration, closure evidence
• Dissemination/training evidence: distribution emails, LMS completion logs, meeting notes, policy attestation logs
• Audit trail: tickets showing required steps completed in sequence

Common exam/audit questions and hangups

Expect these lines of inquiry:

• “Show me your SCRM policy and the procedures it references.” ¹
• “Who owns SCRM, and who can approve exceptions?”
• “How do you ensure Procurement does not bypass Security review?”
• “Give me examples of three recent third parties onboarded and the full evidence package.”
• “How do you handle subcontractors or downstream third parties?”
• “How do you disseminate updates, and how do you know teams read them?”

Hangup: Teams confuse “dissemination” with “it’s on Confluence.” Expect to show active distribution and role-based training records.

Frequent implementation mistakes (and how to avoid them)

1. Policy without procedures. Fix: Write procedures that directly implement each policy requirement ¹.
2. Procedures that don’t match reality. Fix: Document the actual workflow and then improve it; don’t document the idealized future-state only.
3. No defined scope. Fix: Explicitly define which third parties and components are in scope and what triggers a review.
4. Exception process is informal. Fix: Require written exceptions with compensating controls, approver, and expiration.
5. Evidence scattered across inboxes. Fix: Centralize evidence retention by third party (or by system component) with a consistent folder/ticket structure.

Risk implications (why auditors care)

Supply chain incidents often become system incidents. SR-1 reduces the chance that high-risk third parties, unmanaged subcontractors, or unvetted software components enter the environment without controls, visibility, or contractual enforcement ¹. The practical risk is loss of authorization confidence: if you cannot prove repeatable SCRM governance, assessors may treat downstream control results as unreliable.

A practical 30/60/90-day execution plan

First 30 days (stabilize governance and draft)

• Assign SCRM owner and executive sponsor; confirm coordination group membership.
• Draft SCRM policy with the SR-1 required elements ¹.
• Inventory current third-party onboarding and software intake flows; identify where approvals and evidence live.
• Define a basic risk tiering model and the minimum required steps per tier.

By 60 days (operationalize procedures and evidence)

• Publish procedures for third-party due diligence, monitoring triggers, exceptions, and offboarding.
• Implement workflow gates in procurement/ticketing (even if manual approvals at first).
• Stand up an evidence repository structure and a “minimum due diligence package” checklist.
• Run a pilot on a small set of active third parties to validate the process end-to-end.

By 90 days (prove dissemination and make it repeatable)

• Disseminate policy and procedures to all impacted teams; capture attestations or training completion.
• Run an internal spot-check: select recent third parties and verify required artifacts exist and match the procedure.
• Tune the process based on failures (missing approvals, unclear scope, slow routing).
• Establish a steady-state cadence for policy/procedure updates and exception reporting to leadership.

Frequently Asked Questions

Do we need both a SCRM policy and SCRM procedures for SR-1?

Yes. SR-1 explicitly requires “policy and procedures,” and assessors commonly ask to see the procedures that implement the policy requirements ¹.

What counts as “disseminate” for this requirement?

Dissemination means more than posting a document. Keep proof that the right groups received the policy and procedures (email distribution, attestation, or training records), and that updates are communicated.

Can we treat vendor management and supply chain risk management as the same program?

Often yes operationally, as long as your documents clearly cover the full supply chain scope you rely on, including third parties beyond classic “vendors” and relevant software/components.

How detailed do the procedures need to be?

Detailed enough that a new hire can follow them and produce consistent evidence. If the procedure doesn’t specify required inputs, approvers, and retained artifacts, it will be hard to defend in an assessment.

What’s the minimum evidence we should be able to show an assessor?

An approved policy, written procedures, dissemination/training records, and multiple completed third-party due diligence packages with risk tiering, review notes, approvals, and exceptions (if any).

What if a business team needs to onboard a third party urgently?

Your exception process should cover this. Require a written exception with defined compensating controls, an approver with authority, and a time limit with a follow-up review.

Footnotes

1. NIST Special Publication 800-53 Revision 5