How are CADA procurement fees calculated? Article 40 explained

Under the proposed Cloud and AI Development Act (CADA), procurement fees are strictly calculated as cost-recovery mechanisms designed to reimburse the Euro

Summary Under the proposed Cloud and AI Development Act (CADA), procurement fees are strictly calculated as cost-recovery mechanisms designed to reimburse the European Commission for the administrative and operational costs of acting as a central purchasing body. As proposed in Article 40, these fees must be set in advance, be proportionate to the estimated costs determined in a cost-effective way, reflect practices of comparable procurement frameworks, and be sufficient to cover all direct and indirect costs. The specific methodologies, individual fee amounts, and payment conditions will not be fixed in the regulation itself but will be detailed in future implementing acts adopted by the Commission under the examination procedure of Article 46(2).

Detail

The proposed Cloud and AI Development Act (CADA), COM(2026) 502 final, establishes a novel mechanism allowing the European Commission to act as a central purchasing body for cloud computing services, data centre services, software, and AI systems. This framework enables the Commission to procure on behalf of Member States' contracting authorities, Union entities, and selected partner organisations to leverage collective purchasing power. To ensure the financial sustainability of this joint procurement framework without burdening the general EU budget indefinitely, Article 40 establishes a precise legal regime for calculating and levying fees.

The Legal Basis: Joint Financing via Fees

The foundational principle of the CADA procurement fee structure is that the costs of the common procurement framework are not a permanent charge on the Union's general budget. Instead, they are to be jointly financed by the participating entities.

Article 40(1) explicitly states: "The costs arising from the procurement activities carried out pursuant to this Chapter shall be jointly financed by the participating entities through fees levied by the Commission." This creates a self-sustaining ecosystem where the beneficiaries of the aggregated purchasing power—the public sector bodies and Union entities—directly fund the administrative machinery required to deliver those services.

The Four Pillars of Fee Calculation (Article 40(4))

The most critical provision for understanding the calculation methodology is Article 40(4). This paragraph imposes strict constraints on how the Commission may determine the fee amount, preventing arbitrary pricing and ensuring fairness for public buyers. As proposed, the fees must satisfy four cumulative conditions:

Set in Advance: The fees must be established before the procurement activities commence. This provides participating entities with the necessary budgetary certainty to plan their expenditures, avoiding unexpected surcharges during the procurement lifecycle.
Proportionate to Estimated Costs: The fee amount cannot be arbitrary or profit-driven. It must correspond directly to the estimated costs of the activities for which the fees are chargeable. The calculation must be performed in a cost-effective way, ensuring that the Commission manages the procurement process efficiently to keep the cost base—and consequently the fees—as low as reasonably possible.
Reflect Comparable Frameworks: The methodology used to calculate the fees must align with the practices of comparable procurement frameworks. This ensures that the EU's approach remains consistent with established market norms for central purchasing bodies and avoids creating a competitive disadvantage or an outlier regulatory burden.
Sufficient to Cover Costs: The total revenue generated from these fees must be sufficient to cover all costs incurred by the Commission in connection with the procurement activities. This includes both direct costs (e.g., staff, external contractors) and indirect costs (e.g., overheads, ancillary services).

Treatment of Initial Establishment Costs

The calculation of fees also accounts for the upfront investment required to launch the common procurement platform. Article 40(2) provides a mechanism for handling initial setup costs. It states that costs incurred in establishing the common procurement activities, including the development of the common procurement platform, may be initially borne by the general budget of the Union.

However, this is a temporary measure, not a permanent subsidy. The regulation mandates that these initial costs shall be reimbursed by the participating entities over a period not exceeding three years from the date on which the costs were borne by the Union. Consequently, the fee calculation in the early years of the framework will likely include an amortization component to recover these setup costs. Once this three-year period expires, the fees will reflect only the ongoing operational and administrative costs of the procurement activities.

The Role of Implementing Acts and the Examination Procedure

While Article 40 sets the high-level principles and constraints, it does not specify exact fee amounts, complex calculation formulas, or specific payment schedules. This level of operational detail is reserved for secondary legislation to allow for flexibility as the framework evolves.

Article 40(5) empowers the Commission to adopt implementing acts to lay down the detailed rules for determining the fees. These acts will specifically specify:

The estimated costs attributable to the procurement activities for which fees are chargeable.
The individual amounts of the chargeable fees.
The manner and conditions under which the fees are to be paid.

Crucially, these implementing acts cannot be adopted unilaterally by the Commission. They must be adopted in accordance with the examination procedure referred to in Article 46(2). This procedure involves a committee composed of representatives from the Member States. The committee must approve the draft implementing acts, ensuring that national perspectives are considered and that the fee calculation methodology is scrutinized by the Member States before it becomes law.

Accounting Treatment: Internal Assigned Revenues

From a financial governance perspective, the revenues generated by these fees have a specific status. Article 40(3) clarifies that revenues generated by the fees constitute internal assigned revenues within the meaning of Article 21(3), point (a), of Regulation (EU, Euratom) 2024/2509 (the Financial Regulation).

These revenues are strictly assigned to cover the costs of the procurement activities carried out pursuant to Article 37. Any revenue remaining after covering these costs is entered into the general budget of the Union. This reinforces the non-profit nature of the fee calculation; the Commission is legally prohibited from retaining surplus fees for general administrative purposes or other unrelated activities. The system is designed to break even, with the primary goal of covering costs rather than generating revenue.

What this means for you

For public-sector procurement officers, financial controllers, and budget managers, the CADA fee structure offers a transparent and predictable model for budgeting joint cloud and AI procurements.

Budgetary Certainty: Because fees must be set in advance (Article 40(4)), you can factor these costs into your procurement budgets with confidence. You will not face unexpected surcharges, provided the fee structure is clearly defined in the implementing acts.
Benchmarking Rights: The requirement that fees reflect comparable procurement frameworks gives you a basis for benchmarking. If the proposed fees appear disproportionately high compared to other central purchasing bodies, you have a legal ground to question the calculation methodology during the examination procedure.
No Hidden Profits: Understanding that these are strictly cost-recovery fees (Article 40(1) and (3)) helps in justifying the expense to internal stakeholders. You are paying for the administrative efficiency of pooled purchasing, not contributing to the Commission's general revenue or generating a profit for the EU.
Active Engagement: Since the exact calculation methods and amounts will be defined in implementing acts (Article 40(5)), procurement officers should actively engage with the consultation processes for these acts. Your input can help ensure that the fee calculation methodology is practical for public sector entities and accurately reflects the true cost of services.
Early-Year Amortization: Be aware that if you join the framework in its early years, your fees may include a portion dedicated to reimbursing the initial EU budget expenditure for setup costs, spread over up to three years (Article 40(2)). This is a temporary cost that will decrease as the setup costs are fully recovered.

Common misconceptions

"The fees are a tax or contribution to the EU budget."

Reality: The fees are strictly for cost recovery. They are internal assigned revenues used solely to cover the costs of the procurement activities. Any surplus generated is transferred to the general EU budget, but the fee calculation is not designed to generate a surplus.

"The Commission can set fees arbitrarily to maximize revenue."

Reality: Article 40(4) strictly limits this. Fees must be proportionate, cost-effective, and reflective of comparable frameworks. They cannot exceed what is necessary to cover the estimated costs. The Commission cannot use the fee mechanism to generate profit.

"The fee structure is fixed in the main regulation."

Reality: The main regulation (CADA) sets the principles. The specific amounts, detailed calculation rules, and payment conditions are left to implementing acts (Article 40(5)), which can be updated as costs and activities evolve.

"Only the final contract value determines the fee."

Reality: While the fee is related to the procurement activity, it covers all costs, including ancillary services and initial setup costs (amortized). The calculation is based on the total estimated costs of the activities, not just a simple percentage of the final contract value, though the final cost may be a factor in determining the "individual amounts" in the implementing acts.

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