Summary Under the proposed Cloud and AI Development Act (CADA), Member States are required to report on their procurement of innovation in cloud computing services and AI systems on a yearly basis. This obligation is explicitly set out in Article 33(3) of the proposal. The annual report must be submitted to the European Commission and must include three specific data points: the size of participating economic operators, detailed trends in small and medium-sized enterprise (SME) participation (including contract numbers, value share, and cross-border activity), and the specific measures taken to improve SME access to these markets.

Detail

The proposed Cloud and AI Development Act (CADA), COM(2026) 502 final, establishes a comprehensive framework to strengthen Europe's cloud and AI ecosystem. A critical component of this framework is the "demand-side" approach, which leverages public procurement to drive innovation and reduce dependencies on non-European providers. To ensure that public authorities are effectively fostering a competitive market for European SMEs, the proposal introduces a rigorous monitoring and reporting regime.

The Legal Basis: Article 33

The reporting obligation is anchored in Title IV, Chapter II, Section 3 of the proposal, specifically Article 33, titled "Monitoring of procurement of innovation in cloud and AI."

Article 33(1) establishes the foundational duty: "Member States shall monitor and report on their use of procurement of innovation in cloud computing services and AI systems." This creates a continuous obligation to track how public funds are being used to stimulate the development of new, innovative solutions in the cloud and AI sectors.

Article 33(3) defines the frequency and the specific content of these reports. It mandates that Member States inform the Commission "on a yearly basis" of the following information:

  1. "The size of the economic operators participating in such procurement."
  2. "SMEs participation trends," which must include:
    • "The number of contracts awarded to SMEs";
    • "Their share of the total contract value, as a percentage";
    • "Where available, the share of cross-border SMEs participation."
  3. "Measures taken to improve SMEs access to public procurement procedures."

This annual cycle is designed to provide the Commission with a consistent, up-to-date stream of data. Unlike the national cloud and AI strategies required under Article 7, which are updated every three years, the procurement data reporting is an annual event. This ensures that the Commission can detect shifts in market dynamics, identify emerging barriers for smaller providers, and assess the effectiveness of national policies in near real-time.

The Strategic Context: The 25% Objective

The reporting requirement is not merely administrative; it serves as the primary mechanism for tracking progress toward a specific policy target. Article 33(4) states that Member States shall pursue as an objective that "at least 25% of their procurement for cloud computing services and AI systems be awarded to innovative SMEs."

While the 25% figure is an objective to be pursued rather than a strict legal quota with automatic penalties for non-compliance, the reporting on progress toward this objective is mandatory. Article 33(4) further requires Member States to include plans on how they intend to achieve this objective in their national cloud and AI strategies. Consequently, the annual report under Article 33(3) acts as the accountability tool: it verifies whether the plans outlined in the national strategy are translating into actual market outcomes for SMEs.

Why Yearly Reporting Matters

The requirement for yearly reporting addresses specific market failures identified in the proposal's explanatory memorandum, particularly the "imperfect information" regarding the availability and competitiveness of European cloud providers. Without granular, frequent data, it is difficult to determine if European SMEs are being systematically excluded from high-value innovation contracts due to complex procurement procedures, lack of technical capacity, or market concentration.

By mandating the reporting of "cross-border SMEs participation," Article 33(3) specifically targets the functioning of the single market. If data reveals that SMEs are winning contracts domestically but failing to participate across borders, the Commission and Member States can identify whether the issue stems from legal fragmentation, technical standards, or procurement practices. This feedback loop allows for targeted corrective actions, such as harmonizing tender documentation or providing specific support for cross-border bidders.

What this means for you

For public-sector procurement officers, national authorities, and SMEs interested in the cloud and AI market, the introduction of CADA's reporting framework has significant operational implications.

  • For National Authorities and Procurement Bodies:

    • Data Infrastructure: You must establish or upgrade data collection systems to specifically tag procurement procedures as "procurement of innovation" within the cloud and AI sectors. Your systems must be capable of capturing the size of the winning bidder (SME vs. large enterprise) and their geographic origin (domestic vs. cross-border).
    • Annual Cadence: Prepare for a recurring annual deadline. Unlike the triennial national strategy updates, this reporting cycle is strict and yearly. Ensure that data on contract values, numbers of awards, and specific access measures is compiled and verified annually.
    • Documentation of Measures: Do not just report numbers. You must document the specific "measures taken to improve SMEs access." This includes evidence of contract splitting (lots), simplified tendering procedures, pre-commercial procurement, or partnerships with innovation hubs. These qualitative measures are as critical as the quantitative data.

  • For SMEs and European Providers:

    • Visibility: The annual reports will provide a clearer picture of the market landscape. If your Member State reports low cross-border SME participation, it may indicate a need for advocacy or targeted support programs.
    • Alignment with Strategy: Your opportunities may be influenced by the national strategy's plan to reach the 25% target. The annual report will highlight whether these plans are being executed, potentially influencing future procurement priorities.

Common misconceptions

Misconception 1: Reporting is only required for large-value contracts. Reality: Article 33 applies to "procurement of innovation in cloud computing services and AI systems." The text does not specify a minimum financial threshold. The obligation is triggered by the nature of the procurement (innovation) and the sector (cloud/AI), regardless of the contract value.

Misconception 2: The 25% target is a mandatory legal quota. Reality: Article 33(4) states that Member States shall "pursue as objective" that at least 25% of procurement be awarded to innovative SMEs. This is an aspirational goal. However, the reporting on progress toward this goal is a mandatory legal obligation under Article 33(3). Failure to report is an infringement, even if the 25% target is not met.

Misconception 3: Reporting happens only once when the national strategy is adopted. Reality: While the national strategy under Article 7 is adopted once (and updated every three years), the procurement data reporting under Article 33(3) is explicitly "on a yearly basis." This frequent reporting ensures that the Commission can monitor real-time trends and intervene if necessary, rather than waiting for a triennial review.

Misconception 4: Only the final contract award matters. Reality: The report requires data on "trends," which implies a broader view of the procurement process. While the text specifically lists "number of contracts awarded," the context of "trends" and "access measures" suggests that understanding participation rates and barriers is part of the monitoring objective. The data helps identify why SMEs may have dropped out or failed to bid.

Related

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