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Signed Into Law
Signed June 20, 2025Effective 2025-06-20
HB2818

Regular Session

Relating to the artificial intelligence division within the Department of Information Resources.

Government Affairs & Regulatory Compliance Analysis

HB2818: Government Affairs Overview

HB2818 fundamentally alters the procurement model for state IT modernization projects, shifting the preference from human-labor-intensive coding to Generative AI (GenAI) automation. Effective immediately, vendors bidding on legacy system replacement contracts with the Department of Information Resources (DIR) must demonstrate that GenAI will perform the majority of the work, creating a new barrier to entry for firms relying on traditional manual development models.

Rep. Giovanni Capriglione·House Bill·Regular Session

Moderate
Low Cost
Effective:2025-06-20

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HB2818
Relating to the artificial intelligence division within the Department of Information Resources.
Moderate Urgency
Passed with Opposition
House Vote111 - 14
YEA
89% in favor125 voting
Senate Vote30 - 1
YEA
97% in favor31 voting
15
Total Opposition Votes
Cost Impact
Low
Effective
2025-06-20
Enforcing Agencies
DIR
Primary Author: Rep. Giovanni Capriglione
89th Texas Legislature
jdkey.com
01

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: June 20, 2025 (Immediate effect due to supermajority vote).
  • Compliance Deadline: Immediate for new solicitations. Any proposal submitted to DIR for legacy system modernization after June 20, 2025, is subject to the "majority work" AI requirement.
  • Agency Rulemaking: DIR is mandated to adopt rules "as soon as practicable." Expect a regulatory gray zone between now and Q4 2025 where DIR operates based on internal guidance before formal rules are published in the *Texas Register*.

Immediate Action Plan

  • 1. Audit Active Pipelines: Review all pending bids for Texas IT modernization. If you proposed a manual labor model, you must pivot immediately to an AI-assisted model to remain compliant.
  • 2. Define "Baseline" Methodologies: Create a standard internal formula for calculating "Traditional Costs." You will need this to defend your "Savings" numbers in the mandatory post-project reports.
  • 3. Update IP Policies: Verify that your GenAI tools do not infringe on third-party IP. The state will transfer this risk entirely to you via contract indemnification.
  • 4. Monitor the Texas Register: Assign a compliance officer to watch for DIR's proposed rules regarding the definition of "majority work" and security standards for AI code.

Operational Changes Required

Contracts

  • "Majority Work" Clauses: New State of Texas contracts for modernization will mandate that GenAI completes a "majority" of the work.
  • *Critical Note:* While the statute says "majority" (>50%), the Legislative Budget Board's Fiscal Note explicitly assumes 90% of the work will be AI-generated. Expect DIR contract negotiators to push for the 90% threshold, not 51%.
  • IP Indemnification: You must update Master Services Agreements (MSAs) to address AI-generated code. The state will likely require vendors to indemnify the state against copyright claims arising from the training data used by the vendor's AI tools.

Hiring/Training

  • New Role Requirements: Your proposal teams must now include "AI Suitability Assessments." You cannot bid on these projects without a technical lead capable of certifying which portions of the legacy code are compatible with GenAI ingestion.
  • Staffing Shift: The Fiscal Note anticipates DIR hiring internal Systems Analysts to evaluate AI code security and bias. Your delivery teams must be trained to interface with these specific state oversight roles, particularly regarding "Human-in-the-Loop" (HITL) security verification.

Reporting & Record-Keeping

  • Mandatory Cost Analysis Report: Sec. 2054.703 creates a statutory requirement to file a report upon project completion.
  • Required Metrics: You must track and report three specific data points to get paid/close out the contract:
  • 1. Time Saved: AI delivery vs. estimated manual delivery.
  • 2. Money Saved: Hard currency comparison.
  • 3. Resource Efficiency: FTE hours saved.
  • Baseline Data: You must establish an agreed-upon "manual baseline" cost *before* the project starts; otherwise, you cannot legally calculate the "savings" required for the final report.

Fees & Costs

  • No New Statutory Fees: There are no new filing fees.
  • Tooling Costs: Vendors bear the cost of the GenAI licenses and compute power unless the contract specifies the use of a state-provided environment.

Strategic Ambiguities & Considerations

  • Definition of "Work": The statute requires AI to complete the "majority of the work" but fails to define the metric. Is this calculated by Lines of Code (LOC), Function Points, or Billable Hours?
  • *Risk:* If DIR defines this by LOC, it incentivizes bloated AI code. If by hours, it incentivizes efficiency. Watch the rulemaking closely for this definition.
  • Vendor vs. State AI Stack: Sec. 2054.702(b) allows DIR to use its own AI or contract a vendor's AI. It is unclear if vendors will be forced to use a specific, state-approved AI platform (e.g., a specific Azure/OpenAI instance) or if vendors can bring their own proprietary tools.
  • Liability for "Hallucinations": The law is silent on liability for errors introduced by the mandated AI. Until rules are set, vendors should assume strict liability for code security flaws, even if the AI generated them.

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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

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Legislative Timeline

This bill's path through the Texas Legislature

Filed
Feb 13, 2025
Passed House
Apr 25, 2025
Passed Senate
May 26, 2025
Signed
Jun 20, 2025
Effective
Jun 20, 2025
TopicsArtificial IntelligencePurchasingPurchasing--stateState Agencies, Boards & CommissionsInformation Resources, Department of
03

House Authors

Rep. Giovanni CapriglioneRepublican · Primary Author
Coauthors (3)

Senate Sponsor

Sen. Tan ParkerRepublican · Primary Sponsor

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

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More from Rep. Giovanni Capriglione

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Quick Reference

Frequently Asked Questions

Common questions about HB2818

Q

What does Texas HB2818 do?

HB2818 fundamentally alters the procurement model for state IT modernization projects, shifting the preference from human-labor-intensive coding to Generative AI (GenAI) automation. Effective immediately, vendors bidding on legacy system replacement contracts with the Department of Information Resources (DIR) must demonstrate that GenAI will perform the majority of the work, creating a new barrier to entry for firms relying on traditional manual development models.

Q

Who authored HB2818?

HB2818 was authored by Texas Representative Giovanni Capriglione during the Regular Session.

Q

When was HB2818 signed into law?

HB2818 was signed into law by Governor Greg Abbott on June 20, 2025.

Q

Which agencies enforce HB2818?

HB2818 is enforced by Department of Information Resources (DIR).

Q

How significant are the changes in HB2818?

The regulatory priority for HB2818 is rated as "moderate". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of HB2818?

The cost impact of HB2818 is estimated as "low". This may vary based on industry and implementation requirements.

Q

What topics does HB2818 address?

HB2818 addresses topics including artificial intelligence, purchasing, purchasing--state, state agencies, boards & commissions and information resources, department of.

Q

What are the key dates for HB2818?

Key dates for HB2818: Effective date is 2025-06-20. Rulemaking: Adopt rules to implement Subchapter S, specifically regarding the administration of the AI Division and standards for GenAI projects. (As soon as practicable after 2025-06-20). Consult with legal counsel regarding applicability.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026