Summary Under the proposed Cloud and AI Development Act (CADA), central procurement creates Union added value by aggregating demand from Member States and Union entities, allowing the Commission to act as a central purchasing body. This scale enables better negotiation terms, reduces administrative duplication, and strategically directs public spending toward sovereign, EU-based cloud and AI solutions. By applying specific "Union added value" award criteria under Article 32 within the framework of Article 37, the mechanism actively strengthens the European digital supply chain, fosters innovation, and reduces dependence on third-country providers.

Detail

The proposed Cloud and AI Development Act (CADA) establishes a sophisticated framework for central procurement designed to transform the EU's digital market dynamics. While the Data Act and other instruments address switching and interoperability, CADA introduces a proactive mechanism to shape the market through collective buying power. This is primarily governed by Article 37, which empowers the European Commission to carry out procurement activities for data centre services, cloud computing services, software, and AI systems on behalf of Union entities, Member States' contracting authorities, and selected partner organisations.

Aggregating Demand to Achieve Strategic Scale

The core mechanism for creating Union added value is demand aggregation. Historically, public procurement in the EU has been fragmented, with individual Member States or local authorities operating in silos. This fragmentation limits purchasing power and often results in higher costs and reliance on a limited pool of non-EU providers.

Under Article 37(1) and Article 37(3), the Commission can act as a central purchasing body, pooling the requirements of multiple "participating entities." This aggregation serves two critical functions:

  • Economic Leverage: By consolidating demand, the Commission can negotiate better prices, more favourable service-level agreements, and improved commercial terms than any single Member State could achieve alone. This directly reduces the total cost of ownership for public administrations.
  • Market Shaping: Large, aggregated contracts create a predictable, high-volume market. This scale is essential for encouraging investment in European infrastructure. It signals to the market that there is a stable, long-term demand for services that meet EU sovereignty standards, thereby incentivising providers to invest in EU-based capacity and certification.

Integrating Union Added Value Criteria

CADA explicitly links this central procurement power to the goal of technological sovereignty through the integration of "Union added value" criteria. While Article 37 provides the mechanism for centralised purchasing, Article 32 provides the strategic criteria that must be applied.

Article 32(1) mandates that in public procurement procedures for innovative cloud computing services and AI systems, contracting authorities must include non-price award criteria that evaluate the tenderer's contribution to the development of a European cloud and AI ecosystem. When the Commission conducts central procurement under Article 37, it applies these criteria to ensure that the aggregated buying power drives specific outcomes:

  • Strengthening the Digital Supply Chain: Authorities can evaluate the extent to which a 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 (Article 32(3)(a)).
  • Integration of EU Technologies: The criteria assess whether the tenderer has integrated technologies developed in the Union, including research and development results stemming from Union-funded programmes (Article 32(3)(b)).
  • Security of Supply: The evaluation considers how the innovation required to deliver the service contributes to strengthening the security of supply and the development of a European cloud and AI ecosystem (Article 32(3)(c)).
  • Hardware Origin: Authorities can evaluate whether the service is delivered, to the greatest extent feasible, through critical computing, storage, and networking hardware components designed and/or manufactured in the Union (Article 32(3)(d)).

By embedding these criteria into the central procurement framework, the Commission ensures that the scale of the EU public sector is used to actively support providers who contribute to the Union's strategic autonomy. This creates a positive feedback loop: as more public bodies adopt services through central procurement, the market share of EU-based providers grows, further strengthening the ecosystem.

Fostering Innovation and SME Participation

The central procurement mechanism also serves as a catalyst for innovation, particularly for small and medium-sized enterprises (SMEs). Article 33 sets an objective for Member States to award at least 25% of their procurement for cloud computing services and AI systems to innovative SMEs.

Central procurement under Article 37 facilitates this by:

  • Lowering Barriers to Entry: By establishing dynamic purchasing systems and framework agreements, the Commission creates accessible channels for SMEs to participate in large-scale public contracts without needing to navigate complex, standalone national procedures.
  • Promoting Matchmaking: The Commission is empowered to facilitate connections between public buyers and innovative European SMEs, ensuring that smaller providers have a fair chance to compete alongside larger incumbents.
  • Innovation Procurement: The framework supports the design of simplified, proportionate, and SME-friendly procurement strategies, including the division of contracts into lots, to improve access for smaller innovators.

The Role of the Commission and Participating Entities

The central procurement framework is not a top-down mandate but a collaborative mechanism. Article 38 requires the Commission and at least two Member States to enter into an agreement laying down practical arrangements. This agreement establishes a Steering Committee responsible for strategic oversight, ensuring that the procurement agenda aligns with the Union's sovereignty goals.

Participating entitiesβ€”whether Union institutions, Member States' contracting authorities, or partner organisationsβ€”can accede to this framework. Article 39 clarifies that when an entity acquires services through the Commission acting as a central purchasing body, it is deemed to have fulfilled its obligations under applicable Union public procurement law. This legal certainty encourages widespread adoption.

Furthermore, Article 40 establishes a fee mechanism to cover the costs of these procurement activities, ensuring the framework is financially sustainable and operates on a cost-recovery basis.

What this means for you

For public-sector procurement officers and IT decision-makers, CADA's central procurement mechanism offers a strategic pathway to access high-quality, sovereign cloud and AI services while maximising value for money.

  • Strategic Alignment: By joining the Commission's central purchasing framework, your authority can align its procurement with EU sovereignty goals without needing to develop complex national strategies from scratch.
  • Efficiency and Cost Savings: You can leverage pre-negotiated contracts and framework agreements, significantly reducing the administrative burden and time-to-market for critical digital services.
  • Supporting the European Ecosystem: Participating in central procurement allows you to directly contribute to the growth of the European cloud and AI industry. By utilising the Union added value criteria, you ensure that public funds support providers who invest in EU-based infrastructure and innovation.
  • Compliance: Using centrally procured services helps your authority meet CADA's requirements for Union assurance levels, particularly for activities identified as contributing to the preservation of public order under Article 29.

You will need to engage with the Commission's central procurement platform and adhere to the specific rules set out in the procurement agreements. This includes understanding how Union added value criteria are weighted and ensuring that your usage of centrally procured services aligns with your specific risk assessments.

Common misconceptions

"Central procurement replaces national procurement entirely." No. CADA's central procurement is an additional, optional tool designed to complement national procurement. Member States and public authorities retain the right to conduct their own procurement procedures. However, central procurement offers significant advantages in terms of scale, efficiency, and sovereignty alignment, making it an attractive option for many.

"Union added value criteria automatically exclude non-EU providers." The criteria are designed to favour EU-based supply and innovation, but they do not automatically disqualify non-EU providers. Under Article 32(2), these criteria must be "ancillary and not decisive" in the award of the contract. They are considered alongside technical and financial criteria. Non-EU providers can still compete, but they may score lower on Union added value if they do not contribute to the European ecosystem, such as by using EU-manufactured hardware or integrating EU-developed technologies.

"Central procurement is only for large cloud services." While central procurement is particularly beneficial for large-scale cloud and AI services, the framework is flexible. Article 37 explicitly covers data centre services, software, and AI systems. The scope is determined by the needs of participating entities and the strategic direction set by the Steering Committee.

"The Commission imposes these criteria unilaterally." The central procurement framework is governed by an agreement between the Commission and participating Member States, overseen by a Steering Committee (Article 38). This ensures that the strategic direction and application of Union added value criteria reflect the collective priorities of the participating entities.

Official sources

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