The Bill would bar the federal government from buying goods or services that are produced directly by overseas workers or by domestic companies using foreign subcontractors.
Federal privatisation efforts and state programmes using federal funding would also be limited.
Meanwhile in New Delhi, National Association of Software and Service Companies (Nasscom) on Thursday said the latest US legislation against outsourcing is not positive.
IT industry worldwide has flourished on principles of free trade and such restrictions are not positive, said Nasscom president Kiran Karnik on the sidelines of an E-governance event.
On Wednesday, Mr Dodd said the legislation aimed to protect American jobs.
Workers in Connecticut and across the nation are first-rate. It simply doesnt make sense to export their jobs and futures halfway around the world to save a few pennies.
This legislation is a step toward stopping the needless export of American workplaces, Mr Dodd said.
Several legislations against outsourcing have already been introduced in the US Senate and states.