To prohibit the Secretary of Defense from entering into software source code contracts with entities with certain relationships with China, and for other purposes.
Summary
HB3961 would restrict the Department of Defense from entering into, renewing, or extending contracts for software source code with certain entities that have ties to China. The bill targets three categories of contractors: those that own, operate, substantially fund, or have a material interest in artificial intelligence research or development facilities located in a covered country; those that have allowed a covered country access to software or source code in a way that could enable reverse engineering; and those that operate data centers in a covered country connected to the software at issue, including through affiliates or on behalf of the contractor.
The bill also gives the Secretary of Defense authority to waive the prohibition if doing so is determined to be in the national security interests of the United States. The restriction would apply only to contracts entered into, renewed, or extended within three years after enactment, and it incorporates existing statutory definitions for “covered country” and “material interest.”
Impact
If enacted, the bill would add a new procurement restriction in defense contracting law, limiting DoD’s ability to buy software source code from entities with specified China-related relationships. It would affect contractors, subcontractors, affiliates, and firms with AI or data-center operations in covered countries, while preserving a national-security waiver for the Pentagon. The measure would likely influence vendor screening, supply-chain due diligence, and contracting practices for software and AI-related defense work.
Sentiment
The available record shows the bill was introduced and referred to the House Committee on Armed Services, with no recorded votes or committee transcript debate provided. Based on the text and sponsorship, the bill appears to reflect a security-focused, China-restriction approach that is likely intended to attract support from members concerned about technology transfer, cyber risk, and defense supply-chain integrity. No formal opposition is documented in the provided materials.
Contention
The main points of contention are likely to be the breadth of the China-related restrictions and how they are applied to companies with indirect ties, including affiliates, parent companies, and data-center operations. Another likely issue is the scope of the Secretary’s discretion in determining what counts as a “material interest,” what facilities qualify as AI research or development sites, and when a waiver is justified on national security grounds. Critics could argue the bill may be overinclusive or difficult to administer, while supporters would emphasize preventing reverse engineering, protecting sensitive code, and reducing exposure to foreign adversary influence.
State procurement; Procurement Protection Act of 2026; prohibiting certain entities from entering into contracts with certain companies; disclosure statements; penalties; exceptions; effective date.