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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
AMENDED
state contracts; foreign adversary; prohibition
Purpose
Prohibits a company domiciled in the People's Republic of China from bidding on, submitting a proposal for or entering into a contract with a state agency for goods or services. Requires each company that submits a bid or proposal for a state contract for goods or services to certify that the company is not domiciled in the People's Republic of China. Outlines penalties for a company that submits a false certification letter.
Background
Contracts by state government units must be awarded by competitive sealed bidding. Invitations for bids must be issued and include a purchase description and all contractual terms and conditions applicable to the procurement. Adequate notice of the invitation for bids must be given a reasonable amount of time before the opening date of the bids and may be published in a newspaper of general circulation or electronically on a designated website. The state maintains an official electronic procurement system authorized by the State Procurement Officer (eProcurement System). Procurement files for state contracts may be located in the eProcurement System, the Office of the Director of the Arizona Department of Administration (ADOA) or at a public procurement unit (A.A.C. R2-7-101; A.R.S. § 41-2533).
Current statute prohibits the state, a political subdivision of the state or an agency, board, commission or department (public entity) from entering into a contract with a value of $100,000 or more with a company to acquire or dispose of services, supplies, information technology or construction unless the contract includes a written certification that the company is not currently engaged in, and agrees for the duration of the contract to not engage in, a boycott of goods and services from Israel. A public entity may not adopt a procurement, investment or other policy that has the effect of inducing or requiring a person or company to boycott Israel (A.R.S §§ 35-393 and 35-393.01).
Current statute also prohibits a public entity from entering into or renewing a contract with a company to acquire or dispose of services, supplies, information technology, goods or construction unless the contract includes a written certification that the company does not currently, and agrees for the duration of the contract that it will not, use: 1) the forced labor of ethnic Uyghurs in the People's Republic of China; 2) any goods or services produced by the forced labor of ethnic Uyghurs in the People's Republic of China; or 3) any contractors, subcontractors or suppliers that use the forced labor or any goods or services produced by the forced labor of ethnic Uyghurs in the People's Republic of China (A.R.S. § 35-394).
The Joint Legislative Budget Committee fiscal note estimates that H.B. 2542 could potentially increase state contract costs if the prohibition on contracting with a company domiciled in the People's Republic of China decreases the number of companies who are eligible to compete for state contracts in the procurement process. The impact to the state General Fund cannot be estimated in advance because the frequency of how the statutory exceptions to the outlined requirements will be used and how much H.B. 2542 may generate in civil penalties is unknown (JLBC fiscal note).
Provisions
1. Prohibits a company domiciled in the People's Republic of China from bidding on, submitting a proposal for or entering into a contract with a state agency for goods or services.
2. Requires each company that submits a bid or proposal for a state contract for goods or services to submit a certification letter to ADOA certifying that the company is not domiciled in the People's Republic of China.
3. Requires, if ADOA determines that a company has submitted a certification letter that is false:
a) the company to be liable for a civil penalty of $100,000;
b) the state agency or ADOA to terminate the contract with the company; and
c) the company to be prohibited from bidding for any state contracts for at least 60 months.
4. Allows a state agency to enter into a contract for goods manufactured by a company domiciled in the People's Republic of China if:
a) there are no other reasonable options for the procurement of the specific goods; and
b) not procuring the specific goods would pose a greater threat to the state than the threat associated with the manufacture of goods by a company domiciled in the People's Republic of China.
5. Exempts the Arizona Department of Public Safety from the prohibition on entering into a contract with a company domiciled in the People’s Republic of China for goods or services.
6. Defines company and domicile.
7. Designates this legislation as the Protection Procurement Act.
8. Becomes effective on the general effective date.
Amendments Adopted by Committee of the Whole
· Exempts the Arizona Department of Public Safety from the prohibition relating to contracts.
House Action Senate Action
GOV 2/5/25 DP 4-3-0-0 GOV 3/26/25 DP4-3-0
3rd Read 2/20/25 23-36-1
3rd Read* 3/18/25 32-26-2
*on reconsideration
Prepared by Senate Research
June 18, 2025
AN/slp