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That sounds like a blatant and extreme violation of the First Amendment.
Yes and no.
It's technically a restriction on government, which makes it legally trickier despite being blatantly against the spirit of the first amendment.
"Rejecting the bid isn't prosecution," that's some bullshit. Yeah it is against the spirit for sure.
It's establishing a state minimum RFB. Just like requiring streets to be designed by PEs limits bidding option from those who are perfectly capable of the job from bidding because they lack the stamp.
So they're being eliminated for not meeting qualifications, not for their speech. Furthermore, they're usually eliminated from consideration by municipal, county, and school governments, who didn't write the rule. So the body that wrote the rule (state) isn't perecuting companies directly.
It creates difficulty in establishing standing to sue. It's the state's rule that limits the authority of the cities, so the anti-Israel companies have no standing to sue the state. But the cities also can't sue the state because they can't show damages caused by the discrimination since there's a thousand other bidders who can do the job.
The assholes in the Texas legislature specialize in drafting discriminatory laws that are difficult to challenge in court.
...i do a lot of work with texas municipalities and universities and all their standard contracts include a section forbidding us or any of our subconsultants from boycotting israel...