Summary Under the proposed Cloud and AI Development Act (CADA), Member State buyers can access a streamlined central procurement framework where the European Commission acts as a central purchasing body for cloud computing services, data centre services, software, and AI systems. As proposed, this mechanism is not automatic; it requires the Commission to conclude a specific agreement with at least two Member States before any activity begins. Once this agreement is in force, individual public authorities can accede to become "participating entities." This status allows them to acquire services through Commission-awarded contracts, which are deemed to satisfy their obligations under EU public procurement law, while contributing to the costs through fees levied by the Commission.

Detail

The Cloud and AI Development Act (CADA), proposed by the European Commission in COM(2026) 502 final, introduces a transformative mechanism to leverage collective buying power and reduce dependencies on non-European providers. A central pillar of this strategy is found in Title IV, Chapter IV, specifically Articles 37 and 38. These articles establish a framework where the Commission can act as a central purchasing body on behalf of Member State contracting authorities, Union entities, and selected partner organisations.

The Legal Basis: Commission as Central Purchasing Body

Article 37 of the CADA proposal explicitly empowers the Commission to carry out procurement activities for data centre services, cloud computing services, software, and AI systems. This power extends beyond the Commission's own needs to include "contracting authorities of Member States."

The proposal outlines two primary operational models for this centralised procurement:

  1. Framework Contracts and Dynamic Purchasing Systems: The Commission may conclude framework contracts or operate dynamic purchasing systems specifically for services intended for the participating entities.
  2. Wholesaling: The Commission may act as a wholesaler by acquiring services and supplies and reselling them to contracting authorities of Member States. In exceptional circumstances, the Commission may also donate these supplies.

Crucially, Article 37(1) defines the scope of beneficiaries. It states that "Contracting authorities of Member States, Union entities, and partner organisations selected by the Commission, shall be considered as 'participating entities' under this Chapter." This definition is broad, allowing for a wide range of public bodies to benefit, provided they follow the accession process. The proposal also notes that this power operates "by way of derogation from Article 168 of Regulation (EU, Euratom) 2024/2509," extending the Commission's existing financial rules to include Member State authorities in a way not previously standardised.

The Prerequisite: The Agreement with Member States

The central procurement framework is not a unilateral tool the Commission can deploy at will. It is contingent on a foundational political and legal agreement. Article 38(1) mandates that "Before any procurement activity to be carried out under Article 37, the Commission and at least two Member States shall enter into an agreement."

This agreement is the gateway to the entire system. It serves multiple critical functions:

  • Mandate Creation: It constitutes a formal mandate for the Commission to procure on behalf of, or in the name of, the participating entities.
  • Legal Compliance: It satisfies the requirements for joint procurement agreements and mandates under Article 168 of the Financial Regulation (Regulation (EU, Euratom) 2024/2509).
  • Governance Setup: It establishes the Steering Committee, which is composed of the Commission and one representative from each participating Member State at the national level.

For a Member State buyer to utilize this system, their national government must first be a signatory to this agreement. However, the proposal includes a vital nuance regarding individual participation. Article 38(7) clarifies that "The participation of a contracting authority of a Member State shall not be conditional on that Member State's participation." This means that even if a Member State has not signed the initial agreement, its individual authorities might still be able to accede if the Steering Committee sets conditions allowing it, though the primary route remains through the national agreement.

The Entry into Force Condition

A specific procedural hurdle exists for the agreement itself. While Article 38(1) establishes the requirement to enter into an agreement, the condition for that agreement to become legally effective is found in Article 38(6). This paragraph states: "The agreement will enter into force in accordance with its provisions, subject to the approval of at least two Member States."

This distinction is crucial for legal certainty. The agreement is not binding merely because it is signed; it only becomes operative once the specific condition of approval by at least two Member States is met. Until this threshold is reached, no procurement activities under Article 37 can legally commence.

Becoming a Participating Entity

Once the agreement is in force, individual public authorities can join the framework. To do so, they must become a "participating entity" by acceding to the agreement. The Steering Committee, established under Article 38(4), is responsible for setting "transparent and non-discriminatory conditions for contracting authorities of Member States to accede to the agreement." These conditions may include criteria regarding the size of the authority, minimum procurement amounts, and other objective factors.

Once an authority accedes, it gains immediate access to the procurement procedures launched by the Commission. Article 39(4) empowers the Commission to be proactive, stating it "may decide to launch a procurement procedure open to participating entities without a prior specific request from them." This ensures the framework can anticipate market needs and aggregate demand efficiently.

Furthermore, the proposal includes a flexibility mechanism for Dynamic Purchasing Systems (DPS). Under Article 39(5), participating entities that accede to the agreement after a DPS has been launched may request to join that system. The Commission must approve such requests within 10 working days, provided that the cumulative requests do not exceed 50% of the initial estimated quantities. This allows late-joining authorities to benefit from ongoing contracts without waiting for a new tender cycle, ensuring the system remains open and dynamic.

Derogation from National Procurement Rules

The most significant operational advantage for a Member State buyer is the legal simplification provided by the framework. Article 39(1) establishes a powerful safeguard: "A participating entity shall be deemed to have fulfilled its obligations under applicable Union public procurement law where it acquires supplies or services by means of contracts awarded by the Commission under this Chapter."

This means that when a public authority purchases cloud or AI services through the Commission's central framework, it is legally considered to have complied with the requirements of Directive 2014/24/EU and national transposing laws. The authority does not need to run a separate, parallel national procurement procedure for those specific services. This significantly reduces administrative burden, legal risk, and time-to-market for critical digital infrastructure.

However, this derogation is specific. Article 39(3) notes that if a contracting authority acts as a central purchasing body for other authorities using services acquired from the Commission, it must ensure compliance with the initial contractual provisions in any subsequent contract. This ensures the integrity of the supply chain is maintained even when services are redistributed.

Governance and Strategic Oversight

The framework is designed to be a partnership, not a top-down imposition. It is governed by a Steering Committee as outlined in Article 38(4) and Article 38(5). This committee is responsible for the "strategic oversight of the procurement activities," including proposing the strategic direction of the procurement agenda and approving the strategic direction of each procurement procedure before it is launched.

While the Steering Committee provides strategic guidance and approves the agenda, the operational execution remains with the Commission. Article 38(3) states clearly: "The Commission shall remain responsible for the operation and management of procurement activities, including for deciding on the launch of a procurement procedure, the type of procedure and of contract, and the award of contracts." This separation ensures that while Member States have a say in what is bought, the Commission manages how it is bought, leveraging its expertise in large-scale EU procurement and ensuring consistency.

Cost Recovery via Fees

Participation in this framework is not free. Article 40 establishes that the costs arising from procurement activities are "jointly financed by the participating entities through fees levied by the Commission." These fees are designed to cover all direct and indirect costs incurred by the Commission, including the development and maintenance of the common procurement platform.

Article 40(4) specifies the principles for these fees: they must be set in advance, be proportionate to the estimated costs, and be sufficient to cover those costs. The proposal ensures transparency and fairness, noting that fees should reflect practices of comparable procurement frameworks.

Crucially, the model is strictly cost-recovery. Article 40(3) clarifies the destination of any surplus: "Any revenue remaining after covering those costs shall be entered into the general budget of the Union." This ensures that the Commission does not generate profit from these activities, but rather sustains the function through the contributions of the users.

What this means for you

For public-sector procurement officers and legal counsels in Member States, the CADA proposal offers a powerful, streamlined path to acquiring secure, sovereign cloud and AI technologies. The mechanism shifts the burden of complex, high-stakes procurement from individual national authorities to the Commission, while retaining strategic control at the national level.

Key actions for procurement officers:

  1. Monitor National Participation: Engage with your national government's digital or procurement lead to ensure they are among the Member States signing the Article 38 agreement. Without this national signature, the framework cannot be activated for your country.
  2. Prepare for Accession: Review the criteria that the Steering Committee will set for accession. Ensure your authority meets the thresholds regarding size and minimum amounts to become a "participating entity."
  3. Budget for Fees: When forecasting budgets for cloud or AI procurement, account for the Commission's administrative fees as outlined in Article 40. These fees are cost-recovery based and should be transparent, but they represent a new line item in your procurement planning.
  4. Leverage the Derogation: Once you are a participating entity, you can rely on the Commission's awarded contracts to satisfy your public procurement obligations under Directive 2014/24/EU. This reduces the legal and administrative burden on your team, allowing you to focus on implementation rather than tendering.
  5. Utilise the Platform: The Commission may establish a common procurement platform under Article 37(6). Familiarise yourself with this digital tool, as it will likely be the primary interface for accessing framework contracts and dynamic purchasing systems.

Common misconceptions

Misconception: The Commission forces Member States to use its procurement. Reality: The framework is voluntary at the Member State level. Article 38(1) requires an agreement with at least two Member States to start. Individual contracting authorities must also choose to accede. The Commission cannot force a national authority to buy through its framework.

Misconception: This replaces all national public procurement rules. Reality: The derogation in Article 39(1) only applies to contracts awarded by the Commission under this specific chapter. For any procurement outside this framework, national authorities must still comply with standard EU and national public procurement directives.

Misconception: Only large central governments can participate. Reality: While the initial agreement is between the Commission and Member States, Article 38(7) states that the participation of a contracting authority is not conditional on the Member State's participation. Furthermore, the Steering Committee can set conditions for individual authorities to accede, potentially allowing regional or local bodies to join if they meet the criteria.

Misconception: The fees are a profit-making scheme for the EU. Reality: Article 40(4) states that fees are set to cover costs and are proportionate. Any remaining revenue is entered into the general budget of the Union. The model is strictly cost-recovery, designed to ensure the sustainability of the central procurement function without subsidising it from the general EU budget in the long term.

Misconception: The agreement enters into force immediately upon signing. Reality: While Article 38(1) requires the agreement to be entered into, Article 38(6) specifies that it only enters into force "subject to the approval of at least two Member States." This is a specific condition precedent that must be met before any procurement can begin.

Related

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