Summary Under the proposed Cloud and AI Development Act (CADA), Article 32(2)(a) mandates that any non-price award criteria evaluating a tenderer's "Union added value" must be strictly linked to the subject matter of the contract. This requirement prevents contracting authorities from using procurement to pursue general industrial policy goals unrelated to the specific service being purchased. To comply, tender documents must explicitly articulate the functional or performance-based connection between the criterion (e.g., use of EU-designed hardware) and the quality, security, or resilience of the cloud or AI service. Furthermore, Article 32(2)(d) requires these criteria to be ancillary and not decisive, ensuring they do not override core technical and financial performance metrics.

Detail

The proposed Cloud and AI Development Act (CADA), COM(2026) 502 final, introduces a novel mechanism for public procurement to foster a sovereign European cloud and AI ecosystem. Article 32(1) empowers contracting authorities to include non-price award criteria to evaluate a tenderer's contribution to this ecosystem. However, this power is circumscribed by strict legal boundaries designed to preserve the integrity of the internal market and comply with international trade obligations.

The Legal Mandate: Article 32(2)(a) and the Subject-Matter Link

The primary constraint is found in Article 32(2)(a), which states that when applying non-price award criteria, contracting authorities shall ensure that such criteria are:

"(a) linked to the subject matter of the contract;"

This provision codifies the long-standing jurisprudence of the Court of Justice of the European Union (CJEU). The CJEU has consistently ruled that award criteria must be linked to the subject matter to ensure transparency, equal treatment, and non-discrimination. The "subject matter" refers to the specific goods, works, or services being procured. Criteria cannot be used to pursue general economic or social objectivesβ€”such as regional job creation or broad corporate social responsibilityβ€”unless those objectives have a direct, tangible impact on the quality, performance, or execution of the specific contract.

In the context of CADA, the "subject matter" is the innovative cloud computing service or AI system being procured. Therefore, a criterion evaluating "Union added value" must demonstrate a clear causal or functional connection to how that specific service will be delivered, maintained, or performed. For instance, evaluating whether the software was developed in the Union is permissible only if that development location impacts the security, supply chain resilience, or technical support capabilities of the specific service. It cannot be used merely to favor EU-based companies for general economic reasons unrelated to the contract's performance.

Drafting Tender Documents to Satisfy the Linkage

To satisfy the requirement in Article 32(2)(a), contracting authorities must take deliberate, documented steps during the drafting of tender documents. The linkage cannot be assumed or implied; it must be explicit and justified.

  1. Explicit Definition and Justification: Under Article 32(2)(c), criteria must be "expressly set out in the procurement documents or in the contract notice." Beyond mere listing, the documentation must articulate why a specific aspect of the "Union added value" is relevant to the subject matter. For example, if the criterion is "use of hardware designed in the Union," the tender must explain how this specific design origin enhances the security of supply, reduces latency for the specific use case, or improves data sovereignty for the service in question.
  2. Proportionality and Relevance: The criteria must be proportionate to the value and complexity of the contract. For a small-scale AI procurement, demanding extensive proof of a fully European supply chain might be disproportionate and thus fail the "linked to the subject matter" test if the service's core functionality does not depend on such a chain.
  3. Ancillary, Not Decisive: Article 32(2)(d) explicitly states that these criteria must be "ancillary and not decisive in the award of the contract." This means that while Union added value is considered, it cannot override the core technical and financial criteria that directly relate to the service's performance. The linkage to the subject matter must be strong enough to justify inclusion, but the weighting must remain secondary to the primary performance metrics.

The Scope of Permissible Criteria

Article 32(3) provides a non-exhaustive list of how this linkage can be established. Contracting authorities may evaluate the extent to which:

  • The tenderer contributes to strengthening the digital technology supply chain in the Union, including the use of software or hardware designed or manufactured in the Union.
  • The tenderer has integrated technologies developed in the Union, including research and development results stemming from Union-funded research and development programmes.
  • The innovation required to deliver the service contributes to strengthening the security of supply and the development of a European cloud and AI ecosystem.
  • The service is delivered, to the greatest extent feasible, through critical computing, storage and networking hardware components designed and/or manufactured in the Union.

Crucially, Article 32(3)(d) acknowledges market realities by allowing for hardware from a third country "where this is not feasible," provided it contributes to strengthening security of supply. This flexibility reinforces that the criterion is about the quality and resilience of the subject matter, not a blanket ban on non-EU components.

Compliance and Enforcement Risks

Failure to properly link non-price criteria to the subject matter exposes the procurement to legal challenges from unsuccessful bidders. While CADA does not specify exact penalties for misapplying award criteria (leaving this to Member States under national public procurement law and the general enforcement provisions of Article 24), the risk of contract annulment by national review bodies is significant.

Furthermore, the WTO Government Procurement Agreement (GPA) prohibits discrimination against foreign suppliers. A criterion that is not linked to the subject matter could be viewed as a disguised restriction on trade. By strictly adhering to the "subject matter" link, contracting authorities can demonstrate that the criterion is a legitimate quality requirement rather than a protectionist measure.

What this means for you

For in-house counsel, procurement officers, and legal advisors overseeing public sector procurements of cloud and AI services, Article 32 requires a rigorous, evidence-based approach to tender drafting. You must ensure that any "Union added value" criteria are not just politically desirable, but legally defensible under the subject-matter-link doctrine.

Key Actions:

  • Audit Tender Documents: Review all draft tender notices to ensure that every non-price award criterion explicitly states its connection to the subject matter. Avoid vague references to "supporting European industry" without linking it to service quality, security, or supply chain resilience.
  • Document the Rationale: Maintain internal records that justify why specific EU-based components or development practices are relevant to the specific cloud or AI service being procured. This documentation will be crucial if the procurement is challenged.
  • Ensure Ancillary Status: Verify that the weighting of these non-price criteria does not make them decisive. They must remain secondary to the technical and financial performance criteria directly related to the service's functionality.
  • Monitor Implementation: Ensure that your procurement teams are trained on the distinction between general industrial policy goals (which cannot be award criteria) and subject-matter-linked quality indicators (which can be).

Common misconceptions

Misconception 1: "Union added value" can be used to favor EU companies for any reason. This is incorrect. Article 32(2)(a) strictly requires a link to the subject matter. You cannot award points simply because a company is headquartered in the EU or employs EU citizens, unless those factors directly impact the quality, security, or delivery of the specific cloud or AI service being procured.

Misconception 2: The criteria can be decisive if the public interest is high. This is false. Article 32(2)(d) explicitly states that non-price award criteria under Article 32 must be "ancillary and not decisive." Even for critical public sector activities, the core technical and financial performance of the service must remain the primary basis for the award decision.

Misconception 3: Listing a criterion in Article 32(3) automatically satisfies the linkage requirement. Listing a criterion in Article 32(3) (e.g., use of EU-designed hardware) does not automatically satisfy the linkage requirement. The contracting authority must still explicitly demonstrate in the tender documents how that specific factor relates to the subject matter of the particular contract. The mere existence of the option in the law does not bypass the need for specific justification in the tender.

Related

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