Summary Yes, as proposed, the Cloud and AI Development Act (CADA) explicitly requires Member States to monitor and report on the cross-border participation of small and medium-sized enterprises (SMEs) in innovation procurement for cloud and AI services. Under Article 33(3)(b), Member States must submit this data to the European Commission annually, specifically reporting "the share of cross-border SMEs participation" where available. This reporting mechanism is a cornerstone of CADA's strategy to foster a competitive, single-market ecosystem for European cloud and AI providers by identifying and removing barriers to cross-border trade.

Detail

The Cloud and AI Development Act (CADA), as set out in the proposal COM(2026) 502 final, places significant emphasis on strengthening the European cloud and AI ecosystem by leveraging public procurement to drive innovation and reduce dependency on non-European providers. A critical component of this strategy is ensuring that smaller, often more innovative, European businessesβ€”specifically SMEsβ€”have meaningful access to public contracts across the Union. To achieve this, CADA introduces structured monitoring and reporting obligations for Member States, with a specific focus on cross-border dynamics.

The Reporting Obligation under Article 33

The core provision governing this area is Article 33 of the CADA proposal, titled "Monitoring of procurement of innovation in cloud and AI." This article mandates that Member States actively monitor their use of innovation procurement for cloud computing services and AI systems. The purpose is to identify barriers to SME participation, improve market access, and support the design of proportionate, SME-friendly procurement strategies.

Under Article 33(3), Member States are required to inform the Commission on a yearly basis about specific metrics related to this procurement activity. The article lists three distinct categories of information that must be reported:

  1. The size of the economic operators participating in such procurement.
  2. SME participation trends, including the number of contracts awarded to SMEs, their share of the total contract value (as a percentage), and, where available, the share of cross-border SMEs participation.
  3. Measures taken to improve SMEs' access to public procurement procedures.

The specific requirement to report on cross-border SME participation is found in Article 33(3)(b). The text states that Member States must report "SMEs participation trends, including the number of contracts awarded to SMEs, their share of the total contract value, as a percentage, and, where available, the share of cross-border SMEs participation."

Why "Where Available"?

The phrase "where available" is significant and reflects the current administrative reality of the EU single market. Tracking cross-border participation can be administratively complex. Not all national procurement systems currently capture or easily distinguish whether an SME winner is established in a different Member State than the contracting authority. Data on the "place of establishment" of the winning bidder is not always systematically recorded in a way that allows for immediate cross-border aggregation.

However, by including this metric in the mandatory reporting framework, CADA signals a clear intent to normalize the collection of this data over time. It encourages Member States to enhance their data collection capabilities to better understand the cross-border dynamics of the EU cloud and AI market. The qualifier "where available" ensures that Member States are not penalized for current data gaps but creates a clear trajectory toward full transparency. As national systems modernize, the expectation is that this data will become fully available, allowing for a complete picture of the single market's integration.

Strategic Context: Supporting Single-Market Goals

This reporting requirement is not merely administrative; it is tied to a broader strategic objective. Article 33(4) sets an aspirational goal for Member States: they "shall pursue as objective that at least 25% of their procurement for cloud computing services and AI systems be awarded to innovative SMEs." Member States must include plans in their national cloud and AI strategies (under Article 7) on how they intend to achieve this 25% target.

By tracking cross-border participation, the Commission and Member States can assess whether procurement practices are effectively breaking down national silos. If cross-border SME participation remains low, it may indicate persistent barriers such as complex local administrative requirements, lack of awareness of opportunities in other Member States, or technical specifications that favor domestic incumbents. The data gathered under Article 33 will help identify these barriers and inform future guidance or delegated acts. It serves as a diagnostic tool to measure the health of the single market for cloud and AI services.

Integration with National Strategies

The monitoring under Article 33 is designed to feed directly into the national cloud and AI strategies required by Article 7. These strategies must include measures to accelerate the development and adoption of cloud and AI, particularly among public sector bodies, SMEs, and small mid-caps (SMCs). The annual reporting under Article 33 provides the empirical evidence needed to evaluate whether these national measures are working.

If a Member State's cross-border SME participation share is stagnant, the Commission can use this data to recommend adjustments to the national strategy or to highlight best practices from other Member States that have successfully increased cross-border uptake. This creates a feedback loop where data drives policy improvement, ensuring that the "single market" is not just a legal concept but a practical reality for European innovators.

What this means for you

For public-sector procurement officers, legal teams, and SMEs interested in the EU cloud market, the CADA proposal introduces new layers of accountability and data management.

  1. Enhance Data Collection Systems: Public authorities should ensure their procurement IT systems can capture and distinguish the nationality and size of economic operators. Specifically, verify that you can identify whether an SME winner is from another Member State. If current systems do not track this, planning for upgrades or manual tracking processes is advisable to comply with the "where available" reporting requirement as data availability improves.
  2. Review Procurement Strategies: Align procurement planning with the 25% SME target. Consider using lotting, simplified documentation, and clear, non-discriminatory technical specifications to encourage cross-border SME bids. The data reported under Article 33 will likely highlight which strategies are most effective.
  3. Prepare for Annual Reporting: Establish internal processes to aggregate procurement data annually. You will need to report the number of contracts awarded to SMEs, their value share, and cross-border participation shares. This data will be scrutinized by the Commission and may influence future Commission guidance or recommendations.
  4. Document Barriers and Measures: Keep records of any barriers identified during procurement processes that hinder SME participation, as well as the specific measures taken to address them. This information is required under Article 33(3)(c) and will demonstrate compliance with the spirit of the regulation.

Common misconceptions

  • Misconception: CADA mandates a strict, immediate 25% quota for cross-border SMEs.
    • Reality: Article 33(4) states that Member States "shall pursue as objective" the 25% target for innovative SMEs overall, not specifically cross-border ones. The cross-border metric is for reporting "where available," serving as a diagnostic indicator rather than a hard quota.
  • Misconception: Only large cloud providers are subject to CADA's procurement rules.
    • Reality: CADA specifically aims to boost SME participation. Article 33 focuses heavily on SMEs, and Article 32 encourages award criteria that support European added value, which often benefits smaller, innovative European providers.
  • Misconception: Cross-border participation is optional to track.
    • Reality: While the data is reported "where available," the explicit inclusion of this metric in Article 33(3)(b) creates a strong expectation for Member States to develop the capacity to track it. Ignoring it entirely may be viewed as non-compliant with the monitoring spirit of the regulation, especially as national systems mature.

Related

This is general information about a draft EU regulation, not legal advice.