BILL ANALYSIS

Senate Research Center	C.S.S.B. 1585
89R20585 JCG-D	By: Hughes
	State Affairs
	3/24/2025
	Committee Report (Substituted)

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

Foreign adversaries, particularly China and Russia, have been suspected of using telecommunications equipment to conduct espionage and gather intelligence on sensitive areas in the United States. One of the most concerning examples involves the use of Chinese-made telecommunications equipment, such as those from Huawei and ZTE, near critical infrastructure sites, including nuclear facilities in Nebraska and other regions.

S.B. 1585 accomplishes telecommunications security by the:

1. Prohibition on Contracts with Foreign Adversaries: S.B. 1585 prohibits governmental entities from entering into contracts related to information and communications technology or services with companies identified as "scrutinized companies."

2. Designation of Foreign Adversaries: The bill empowers the governor, in consultation with the Texas Department of Public Safety's public safety director, to designate certain countries as threats to critical infrastructure. This designation is crucial for identifying and mitigating risks posed by foreign adversaries to Texas's critical infrastructure.

3. Penalties for Non-Compliance: S.B. 1585 establishes penalties for vendors that violate the prohibition on contracts with scrutinized companies. This includes civil penalties, which can be twice the amount of the terminated contract or the amount of loss suffered by the state, whichever is greater. Additionally, vendors found in violation are barred from responding to or being awarded governmental contracts for five years following a final determination of violation.

S.B. 1585 seeks to enhance the security and resilience of critical infrastructure systems by restricting contracts with companies linked to foreign adversaries.

(Original Author's/Sponsor's Statement of Intent)

C.S.S.B. 1585 amends current law relating to a prohibition on governmental contracts with companies of foreign adversaries for certain information and communications technology, authorizes a civil penalty, and creates a criminal offense.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends the heading the Chapter 2275, Government Code, 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. Amends Chapter 2275, Government Code, 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. Amends Section 2275.0101, Government Code, to make a conforming change.�

SECTION 4. Amends Section 2275.0103(a), Government Code, to make a conforming change.

SECTION 5. Amends Chapter 2275, Government Code, by adding Subchapter B, as follows:

SUBCHAPTER B. PROHIBITION ON CERTAIN CONTRACTS IN CONNECTION WITH INFORMATION AND COMMUNICATIONS TECHNOLOGY

Sec. 2275.0201. DEFINITIONS. Defines "company," "control," "foreign adversary," "governmental entity," "information or communications technology or service," "scrutinized company," and "two-way communication."

Sec. 2275.0202. CONTRACTS WITH SCRUTINIZED COMPANIES PROHIBITED; EXCEPTION. (a) Prohibits a scrutinized company, except as provided by Subsection (b), from submitting a bid for contract or entering into a contract with a governmental entity relating to an information or communications technology or service.

(b) Authorizes a governmental entity to 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) Requires a vendor submitting a bid for a contract relating to an information or communications technology or service to include in the bid a written verification that the vendor is not a scrutinized company, will not contract with a scrutinized company for any aspect of its performance under the contract, and will not procure products or services from or that originate with a scrutinized company for use in the performance of the contract.

(b) Prohibits a governmental entity from entering 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) Requires 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 to notify the vendor that the vendor is in violation of this subchapter. Requires that the notice include the basis for the entity's determination that the vendor is in violation of this subchapter.

(b) Authorizes the vendor, not later than the 60th day after the date a vendor receives a notice under Subsection (a), to 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. Provides that 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) Requires the governmental entity, not later than the 60th day after the date the governmental entity receives a vendor's response as provided under Subsection (b), to review the response and notify the vendor of the entity's final determination based on the evidence provided by the vendor.

(d) Requires a governmental entity, on making a final determination that a vendor violated this subchapter, to refer the matter to the attorney general, a district attorney, or a county attorney, as applicable, for enforcement under Sections 2275.0207 and 2275.0208, and notify the Comptroller of Public Accounts of the State of Texas (comptroller) for purposes of Section 2275.0206.

Sec. 2275.0205. CONTRACT TERMINATION FOR FALSE VERIFICATION; BARRING FROM STATE CONTRACTS. (a) Requires a governmental entity, on making a final determination that a vendor violated this subchapter, to immediately terminate the contract without further obligation to the vendor.

(b) Prohibits a vendor that violates this subchapter from responding to a solicitation for or being awarded a contract for goods or services by any governmental entity until the fifth anniversary of the date the vendor receives a final determination under Section 2275.0204.

Sec. 2275.0206. DEBARMENT BY COMPTROLLER. Requires the comptroller, on receiving notice of a final determination under Section 2275.0204, to bar the vendor from participating in state contracts until the fifth anniversary of the date the vendor receives the final determination under Section 2275.0204.

Sec. 2275.0207. CIVIL PENALTY. (a) Provides that a vendor that violates this subchapter is liable to the state for a civil penalty in an amount equal to the greater of twice the amount of the contract terminated under Section 2275.0205 or the amount of loss suffered by the state from terminating the contract.

(b) Authorizes the attorney general to bring an action to recover a civil penalty imposed under this section.

(c) Authorizes the attorney general to recover reasonable attorney's fees and court costs in bringing an action under this section.

Sec. 2275.0208.� CRIMINAL PENALTY. (a) Provides that a vendor that violates this subchapter commits an offense.

(b) Provides that an offense under this section is a state jail felony.

SECTION 6. Makes application of Subchapter B, Chapter 2275, Government Code, as added by this Act, prospective.

SECTION 7. Effective date: September 1, 2025.