89R8077 JCG-D

By: Hughes S.B. No. 1585

A BILL TO BE ENTITLED

AN ACT

relating to a prohibition on governmental contracts with companies of foreign adversaries for certain information and communications technology; authorizing a civil penalty; creating a criminal offense.

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. Section 2275.0101, Government Code, is amended to read as follows:

Sec. 2275.0101. DEFINITIONS. In this subchapter [chapter]:

(1) "Company" means a sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, or limited liability company, including a wholly owned subsidiary, majority-owned subsidiary, parent company, or affiliate of those entities or business associations, that exists to make a profit.

(2) "Critical infrastructure" means a communication infrastructure system, cybersecurity system, electric grid, hazardous waste treatment system, or water treatment facility.

(3) "Cybersecurity" means the measures taken to protect a computer, computer network, computer system, or other technology infrastructure against unauthorized use or access.

(4) "Designated country" means a country designated by the governor as a threat to critical infrastructure under Section 2275.0103.

(5) "Governmental entity" means a state agency, a political subdivision, or an independent organization certified under Section 39.151, Utilities Code, to perform a function described by Section 39.151(a), Utilities Code.

(6) "Affiliate," with respect to a company entering into an agreement in which the critical infrastructure is electric grid equipment, has the meaning assigned by the protocols of the independent organization certified under Section 39.151, Utilities Code, for the ERCOT power region.

SECTION 4. Section 2275.0103(a), Government Code, is amended to read as follows:

(a) The governor, after consultation with the public safety director of the Department of Public Safety, may designate a country as a threat to critical infrastructure for purposes of this subchapter [chapter].

SECTION 5. 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) "Foreign adversary" means:

(A) the People's Republic of China; or

(B) any country designated as a foreign adversary by the governor under Section 2275.0206.

(3) "Governmental entity" has the meaning assigned by Section 2251.001.

(4) "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.

(5) "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 a foreign adversary or has its principal place of business in a foreign adversary;

(B) a publicly traded company for which the government of a foreign adversary 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 a foreign adversary 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.

(d) A governmental entity, on making a final determination that a vendor violated this subchapter, shall 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.

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 fifth anniversary of the date the vendor receives a final determination under Section 2275.0204.

Sec. 2275.0206. DESIGNATION OF COUNTRY AS FOREIGN ADVERSARY. (a) The governor may designate a country as a foreign adversary for purposes of this subchapter.

(b) The governor shall consider designating a country as a foreign adversary under Subsection (a) if the United States secretary of commerce, or the secretary's designee, has determined the country to be a foreign adversary under 15 C.F.R. Section 791.4.

Sec. 2275.0207. 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.

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

(b) An offense under this section is a state jail felony.

SECTION 6. 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 7. This Act takes effect September 1, 2025.