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.