Bill Bars China-Tied Companies From Texas Government Tech Contracts

The text as introduced · 1,149 words

89R8425 RDS-D

By: Leo Wilson
H.B. No. 2403

A BILL TO BE ENTITLED

AN ACT

relating to a prohibition on governmental contracts with Chinese

companies for certain information and communications technology;

authorizing a civil penalty.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. The heading to Chapter 2275, Government Code, is

amended to read as follows:

CHAPTER 2275. PROHIBITION ON CONTRACTS WITH CERTAIN FOREIGN-OWNED

COMPANIES IN CONNECTION WITH CRITICAL INFRASTRUCTURE AND

INFORMATION AND COMMUNICATIONS TECHNOLOGY

SECTION 2. Chapter 2275, Government Code, is amended by

designating Sections 2275.0101 through 2275.0103 as Subchapter A

and adding a subchapter heading to read as follows:

SUBCHAPTER A. PROHIBITION ON CERTAIN CONTRACTS IN CONNECTION WITH

CRITICAL INFRASTRUCTURE

SECTION 3. Chapter 2275, Government Code, is amended by

adding Subchapter B to read as follows:

SUBCHAPTER B. PROHIBITION ON CERTAIN CONTRACTS IN CONNECTION WITH

INFORMATION AND COMMUNICATIONS TECHNOLOGY

Sec. 2275.0201. DEFINITIONS. In this subchapter:

(1) "Control" means the direct or indirect power,

whether or not exercised, to determine, direct, or decide important

matters affecting a company through the ownership of a majority or a

dominant minority of the total outstanding voting interest in the

company, board representation, proxy voting, special share,

contractual arrangement, formal or informal arrangement to act in

concert, or other means of exercising power.

(2) "Governmental entity" has the meaning assigned by

Section 2251.001.

(3) "Information or communications technology or

service" means a hardware, software, or other product or service

and its components that is designed to facilitate by electronic

means the processing, storage, retrieval, communication,

transmission, or display of information or data.

(4) "Scrutinized company" means a company or a wholly

owned subsidiary or majority-owned subsidiary of a company that is:

(A) organized in or under the laws of the

People's Republic of China or has its principal place of business in

the People's Republic of China;

(B) a publicly traded company for which the

government of the People's Republic of China has the ability to:

(i) exercise control over the company;

(ii) appoint or discharge a board member,

officer, or director; or

(iii) exercise any other right not

available to a retail investor holding an equivalent share of

ownership; or

(C) a privately held company in which the

government of the People's Republic of China holds any share of

ownership.

Sec. 2275.0202. CONTRACTS WITH SCRUTINIZED COMPANIES

PROHIBITED; EXCEPTION. (a) Except as provided by Subsection (b), a

scrutinized company may not submit a bid for a contract or enter

into a contract with a governmental entity relating to an

information or communications technology or service.

(b) A governmental entity may enter into a contract relating

to an information or communications technology or service with a

scrutinized company if the governmental entity, with the approval

of the governor, determines:

(1) the only vendors available to provide the

information or communications technology or service are

scrutinized companies;

(2) the cost to this state of finding and contracting

with a vendor that is not a scrutinized company would be so

disproportionately high that the use of a vendor that is a

scrutinized company would be overwhelmingly in the best interest of

this state; or

(3) any goods or services that originate with a

scrutinized company and may be used in the performance of the

contract constitute a de minimis amount of the total value of the

goods and services provided under the contract and pose no risk to

the security of this state.

Sec. 2275.0203. VERIFICATION REQUIRED. (a) A vendor

submitting a bid for a contract relating to an information or

communications technology or service shall include in the bid a

written verification that the vendor:

(1) is not a scrutinized company;

(2) will not contract with a scrutinized company for

any aspect of its performance under the contract; and

(3) will not procure products or services from or that

originate with a scrutinized company for use in the performance of

the contract.

(b) A governmental entity may not enter into a contract

relating to an information or communications technology or service

with a vendor that fails to provide the verification required by

Subsection (a).

Sec. 2275.0204. FALSE VERIFICATION; VIOLATION. (a) A

governmental entity that determines that a vendor holding a

contract with the entity was ineligible to have the contract

awarded under Section 2275.0202 because the vendor's written

verification was false shall notify the vendor that the vendor is in

violation of this subchapter. The notice must include the basis for

the entity's determination that the vendor is in violation of this

subchapter.

(b) Not later than the 60th day after the date a vendor

receives a notice under Subsection (a), the vendor may provide a

written response to the governmental entity with evidence that the

vendor's verification was not false and that the vendor is not in

violation of this subchapter. If a vendor does not provide a

response in the manner provided by this subsection, the entity's

determination under Subsection (a) becomes a final determination.

(c) Not later than the 60th day after the date the

governmental entity receives a vendor's response as provided under

Subsection (b), the governmental entity shall review the response

and notify the vendor of the entity's final determination based on

the evidence provided by the vendor.

Sec. 2275.0205. CONTRACT TERMINATION FOR FALSE

VERIFICATION; BARRING FROM STATE CONTRACTS. (a) A governmental

entity, on making a final determination that a vendor violated this

subchapter, shall immediately terminate the contract without

further obligation to the vendor.

(b) A vendor that violates this subchapter is barred from

responding to a solicitation for or being awarded a contract for

goods or services by any governmental entity until the second

anniversary of the date the vendor receives a final determination

under Section 2275.0204.

Sec. 2275.0206. CIVIL PENALTY. (a) A vendor that violates

this subchapter is liable to the state for a civil penalty in an

amount equal to the greater of:

(1) twice the amount of the contract terminated under

Section 2275.0205; or

(2) the amount of loss suffered by the state from

terminating the contract.

(b) The attorney general may bring an action to recover a

civil penalty imposed under this section.

(c) The attorney general may recover reasonable attorney's

fees and court costs in bringing an action under this section.

SECTION 4. Subchapter B, Chapter 2275, Government Code, as

added by this Act, applies only to a contract for which the request

for bids or proposals or other applicable expression of interest is

made public on or after the effective date of this Act. A contract

for which the request for bids or proposals or other applicable

expression of interest is made public before that date is governed

by the law in effect on the date the request or other expression of

interest is made public, and the former law is continued in effect

for that purpose.

SECTION 5. This Act takes effect September 1, 2025.