SB 377

This bill enacts the "Tennessee Procurement Protection Act, the purpose of which is to ensure that suppliers to the state and to political subdivisions of this state are safe, reliable, and free from undue influence and control from foreign adversaries. As used in this bill, a ""foreign adversary"" means a country designated by the United States department of commerce under 15 CFR 791.4 on January 1, 2025, and as amended thereafter. As of the writing of this summary, the following countries are designate d in 15 CFR 791.4: (i) The People's Republic of China, including the Hong Kong Special Administrative Region (China); (ii) the Republic of Cuba (Cuba); (iii) the Islamic Republic of Iran (Iran); (iv) the Democratic People's Republic of Korea (North Korea); and (v) the Russian Federation (Russia). PROHIBITED BIDDING ON PUBLIC CONTRACTS This bill generally prohibits a foreign adversary company from bidding on or submitting a proposal for a contract with a state agency or political subdivision of this state for goods or services. A company that offers to provide final products or servic es to a state agency or a political subdivision of this state that are manufactured or produced by a foreign adversary company must, for the purposes of this bill, be considered a foreign adversary company. However, such restriction does not apply to pro du cts or services that have inputs from a foreign adversary company but that are not final products of a foreign adversary company. As used in this bill, a ""foreign adversary company"" means a company that (i) is domiciled, incorporated, issued, or listed in a foreign adversary; (ii) is headquartered in a foreign adversary; (iii) has its principal place of business in a foreign advers ary; (iv) is controlled by the government or an instrumentality thereof of a foreign adversary; or (v) is majority-owned by an entity or is board-controlled by an entity that is under the jurisdictional control of the government of a foreign adversary. I f a parent company does not meet such criteria and does not recognize more than 50% of the total annual global revenue of the parent company and subsidiaries from China and Hong Kong combined, then the parent company is not a foreign adversary company solel y because one or more subsidiaries or affiliates meet the definition of a foreign adversary company. CERTIFICATION REQUIRED – PENALTIES FOR VIOLATIONS This bill requires a state agency or political subdivision of this state to require a company that submits a bid or proposal for a contract for goods or services to certify that the company is not a foreign adversary company. If the commissioner of fina nce and administration determines that a company has submitted a false certification, then (i) the company is liable for a civil penalty in an amount that is equal to the greater of $250, 000 or twice the amount of the contract for which a bid or proposal wa s submitted; (ii) the state agency or the department of finance and administration must terminate the contract with the company; and (iii) the company is prohibited from bidding on a state contract for 60 months. EXCEPTION This bill authorizes a state agency to enter into a contract for goods or services produced by a foreign adversary company if (i) there is no other reasonable option for procuring the good or service; and (ii) the contract is pre-approved by the departme nt after a determination that not procuring the good or service would pose a greater threat to the state than the threat associated with the good or service itself. ON MARCH 2, 2026, THE HOUSE ADOPTED AMENDMENTS #1 AND #2 AND PASSED HOUSE BILL 548, AS AMENDED. AMENDMENT #1 makes the following revisions:  Revises one of the definitions of a ""foreign adversary company"" from being a company domiciled, incorporated, issued, or listed in a foreign adversary to, instead, being primarily so domiciled, incorporated, issued, or listed .  Expands the provisions described in the summary relative to a parent company to, instead, an entity.  Clarifies that the prohibition of the public procurement of final products or services from a foreign adversary company, whether those products or services are sold directly by the foreign adversary company or through a third-party vendor only applies, with respect to third-party vendors, to such vendors who contract for the procurement of technology devices and software . This amendment defines such devices and software as (i) c ommunication and networking devices, (ii) p ersonal computing devices, (iii) ) i ndustrial and critical infrastructure devices, (iv) g overnment equipment, (v) a utomotive and transportation systems, and (vi) a ny other device or software as prescribed by rule of the chief procurement officer within the department of general services (""CPO"") that is designated as high-risk for purposes of the compromise of data, information, or utility.  Clarifies that the authorization of the public procurement of products and services from a company that has operations, affiliates, and subsidiaries in a foreign adversary, so long as the company is not a foreign adversary company, applies to final products and services.  Revises the provision prohibiting a foreign adversary company from bidding on or submitting a proposal for a contract with a state agency or political subdivision of this state for goods or services to, instead, prohibit state agencies and political subdivisions from contracting with a foreign adversary company for final products or services.  Rewrites the provisions under the CERTIFICATION REQUIRED – PENALTIES FOR VIOLATIONS heading in the summary to, instead, provide the following:  Revises the provision requiring a state agency or political subdivision of this state to require a company that submits a bid or proposal for a contract for goods or services to certify that the company is not a foreign adversary company to, instead, require the CPO, state agency, or political subdivision to require a person that contracts with this state, including a contract renewal, to certify, at the time the bid is submitted or the contract is entered into, renewed, or assigned, that the person or the assignee is not a foreign adversary company.  Requires the CPO, state agency, or political subdivision to include certification information in the procurement record.  Provides that a person or entity that fails to provide a certification or falsifies a certification is (i) s ubject to a civil penalty of $250, 000 or twice the amount of the contract for which the bid or proposal was submitted, whichever is greater; and (ii) prohibited from contracting with this state or a political subdivision of this state for 60 months.  Requires, upon receiving proof satisfactory that a person or entity who was required to make the certification is in violation thereof, the CPO, state agency, or political subdivision to (i) f orward the information to the attorney general who may file an action in a court of appropriate jurisdiction to recover such civil penalty; and (ii) terminate the contract for cause.  Rewrites the provisions under the EXCEPTION heading in the summary to, instead, authorize the CPO, a state agency, or a political subdivision to enter into a contract for final products or services produced by a foreign adversary company if (i) there is no other reasonable option for procuring the final product or service; and (ii) the contract is approved by the CPO, state agency, or political subdivision, after a determination that not procuring the final product or service would pose a greater threat to this state than the threat associated with the product or service itself.  Adds that the bill (i) does not apply to a company, including a third-party vendor, that is in compliance with the federal Secure and Trusted Communications Networks Act of 2019, and (ii) applies to contracts entered into, renewed, or amended on or after July 1, 2025 . AMENDMENT #2 changes the effective date of the bill from July 1, 2025, to July 1, 2026, and applies the bill to contracts entered into, renewed, or amended on or after July 1, 2026, instead of on or after July 1, 2025."