HB 129 bans governmental contracts with foreign adversary companies and federally banned companies. It prohibits Texas governmental entities from contracting with companies that are domiciled, headquartered, or controlled by a foreign adversary, as well as companies identified in federal trade restrictions, including those on the U.S. Department of Defense's list of Chinese military companies. The bill imposes penalties for false certifications regarding a company's eligibility and authorizes civil penalties for violations.
HB 129 adds Chapter 2278 to the Texas Government Code to prohibit governmental entities from entering into contracts for goods or services with companies deemed to be “foreign adversary companies” or “federally banned companies.” These include companies controlled by or domiciled in adversarial nations such as China, Iran, Russia, and others, or those sanctioned or blacklisted by the federal government under statutes like the National Defense Authorization Act or the FCC’s covered equipment list.
The bill requires vendors bidding on government contracts to certify that they are not prohibited under the new provisions. If a vendor is found to have made a false certification, the contracting entity must terminate the agreement and notify the Comptroller, who may bar the vendor from participating in future state contracts for up to five years. Additionally, violators are subject to a civil penalty of at least $250,000 or twice the value of the terminated contract, enforced by the Texas Attorney General.
The bill includes a narrow exception allowing contracts with such companies if no reasonable alternative exists and the failure to procure the good or service poses a greater threat to the state than contracting with the restricted entity. The law applies only to contracts initiated after the bill's effective date.
The Committee Substitute for HB 129 makes several notable revisions to the originally filed version, aiming to refine and narrow the bill’s scope and improve its administrative clarity. Most significantly, the substitute limits the breadth of the contracting prohibition. While the original bill barred not only foreign adversaries and federally banned companies but also any company that provided final goods or services originating from such entities, the substitute version makes this clause more targeted. Under the new language, a company is only considered prohibited if it enters into a contract to sell final goods or services that are specifically produced by a foreign adversary or a federally banned company. This change limits collateral damage to third-party vendors and minimizes unintended economic consequences for companies with indirect exposure to restricted sources.
Another key change lies in the debarment and enforcement process. The original version automatically barred violating vendors from bidding on or receiving any government contracts for five years, with no mention of an oversight mechanism. In contrast, the substitute introduces procedural discretion by authorizing the state comptroller to determine debarment eligibility, utilizing existing protocols outlined in Section 2155.077 of the Government Code. This creates a more formal, review-based process and ensures alignment with existing procurement standards. The substitute also clarifies that the Attorney General is responsible for enforcing civil penalties, providing a more defined enforcement mechanism than the original version’s broader language.
Finally, the substitute bill introduces more precise statutory language and definitions, such as explicitly identifying the Hong Kong Special Administrative Region under China’s inclusion as a foreign adversary. These clarifications strengthen the bill’s enforceability and legal consistency. Taken together, the Committee Substitute demonstrates an effort to maintain the core national security intent of the original bill while ensuring that its implementation is more focused, equitable, and administratively feasible.
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Rep. John McQueeney
