Summary Under the proposed Cloud and AI Development Act (CADA), fees collected from participating public authorities for common procurement activities are legally designated as internal assigned revenues. As proposed in Article 40(3), these funds must be used exclusively to cover the costs of the procurement activities carried out by the Commission under Article 37. Crucially, the proposal mandates that any revenue remaining after covering these specific costs shall be entered into the general budget of the Union, ensuring the mechanism operates on a strict cost-recovery basis without generating profit for the Commission.

Detail

The Cloud and AI Development Act (CADA), as proposed in COM(2026) 502 final, establishes a centralized framework to allow Member States and Union entities to pool their purchasing power for cloud computing services, data centre services, software, and AI systems. To ensure this framework is financially sustainable without placing an undue burden on the general EU budget, the proposal introduces a specific fee mechanism. Understanding the legal destination of these fees is essential for public-sector bodies planning their participation.

The Legal Nature of Fee Revenue: Internal Assigned Revenue

The financial architecture of the common procurement framework is anchored in Article 40 of the CADA proposal. The fundamental principle is that the costs arising from procurement activities are jointly financed by the participating entities through fees levied by the Commission.

The specific legal status of these funds is defined in Article 40(3). The text states that revenues generated by the fees shall constitute "internal assigned revenues within the meaning of Article 21(3), point (a), of Regulation (EU, Euratom) 2024/2509" (the Financial Regulation).

In EU budgetary law, "internal assigned revenues" are funds directly linked to specific expenditure items. This legal classification is critical because it creates a ring-fenced financial stream. The money collected from participating authorities cannot be diverted to the Commission's general administrative overheads, unrelated policy initiatives, or other budget lines. It is legally bound to the specific purpose for which it was collected: funding the common procurement framework.

Specific Costs Covered by the Fees

The assigned revenue is explicitly designated to cover the costs of the procurement activities carried out pursuant to Article 37 of CADA. Article 37 empowers the Commission to act as a central purchasing body for Union entities and Member States' contracting authorities. The fees fund the full spectrum of activities required to make this central purchasing function operational, including:

  1. Procurement Operations: The direct costs of launching, managing, and concluding procurement procedures. This encompasses the administrative and technical resources required to operate dynamic purchasing systems, framework agreements, and other procurement instruments on behalf of the participating entities.
  2. Ancillary Support Services: Under Article 37(4), the Commission may provide ancillary support to participating entities. The fees cover the costs associated with these services, which include:
    • Providing technical infrastructure that enables participating entities to use awarded contracts or award their own specific contracts under framework agreements.
    • Offering advice and support on preparing and implementing procurement procedures.
    • Conducting procurement procedures on behalf of the entities.
    • Managing invoicing and other administrative services relating to the contracts awarded.
  3. Common Procurement Platform: Article 37(6) authorizes the Commission to establish and manage a common procurement platform. The fees fund the development, maintenance, and operation of this digital infrastructure, which facilitates the procurement activities under the chapter.
  4. Reimbursement of Initial Establishment Costs: Article 40(2) addresses the upfront investment required to launch the system. 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, these costs must be reimbursed by the participating entities over a period not exceeding three years from the date the costs were borne by the Union. Thus, early fees may include a component dedicated to repaying these initial setup costs.

The Treatment of Surplus Revenue

A defining feature of the CADA financial model is the strict handling of any excess funds. Article 40(3) explicitly provides that "Any revenue remaining after covering those costs shall be entered into the general budget of the Union."

This provision ensures that the common procurement mechanism does not function as a profit-generating enterprise for the Commission. If the fees collected exceed the actual costs of running the procurement activities, maintaining the platform, and providing ancillary support, the surplus is not retained by the Commission. Instead, it is transferred back to the EU's general budget. This creates a transparent, cost-neutral model where the participating entities pay only for the services they receive, and no more.

Principles of Fee Calculation

While Article 40 defines the destination of the funds, it also establishes the principles for their calculation. Article 40(4) mandates that fees must be:

  • Set in advance.
  • Proportionate to the estimated costs of the activities for which they are chargeable.
  • Determined in a cost-effective way, reflecting practices of comparable procurement frameworks.
  • Sufficient to cover the costs, but not excessive.

The specific methodology for determining these feesβ€”including the estimated costs attributable to the activities, the individual amounts chargeable, and the payment conditionsβ€”will be detailed in implementing acts adopted by the Commission, as provided for in Article 40(5). These acts will ensure the fees remain aligned with the actual operational costs and the principle of proportionality.

What this means for you

For public-sector procurement officers and financial managers, the provisions of Article 40 offer clarity on the financial implications of participating in the CADA common procurement framework.

  • Strict Cost Recovery: You can expect the fees to align closely with the actual administrative, technical, and operational costs of the services provided. The mechanism is designed to be proportionate to the volume of work and costs incurred, preventing arbitrary or inflated charges.
  • No Hidden Subsidies: The requirement that surplus revenue returns to the general EU budget (Article 40(3)) guarantees that your fees are not subsidizing unrelated Commission activities or generating profit. Your contribution is strictly limited to the cost of the procurement support and platform access you utilize.
  • Initial Investment Recovery: Be aware that Article 40(2) allows for the initial establishment costs of the platform to be fronted by the EU budget but reimbursed by participants over three years. Early participants may see fees that include a specific tranche for recouping these infrastructure investments.
  • Comprehensive Coverage: The fees cover the entire lifecycle of the procurement activity. If you utilize ancillary services such as technical infrastructure, procedural advice, or contract management support under Article 37(4), these costs are integrated into the fee structure. Ensure your internal budgeting accounts for the full scope of services you intend to access.

Common misconceptions

"The fees contribute to the Commission's general administrative budget."

  • Reality: No. Article 40(3) designates the revenue as "internal assigned revenue," legally restricting its use to covering the specific costs of the procurement activities under Article 37. Any surplus is returned to the general EU budget, not the Commission's discretionary funds.

"The fees are a profit-making scheme for the EU."

  • Reality: The mechanism is strictly cost-recovery. Fees must be "sufficient to cover those costs" (Article 40(4)), and any remaining revenue is returned to the general budget (Article 40(3)). The Commission does not retain a profit margin.

"Fees only cover the final contract award."

  • Reality: Fees cover the entire lifecycle of the procurement activity. This includes the development and maintenance of the common procurement platform (Article 37(6)), ancillary support like technical infrastructure and advice (Article 37(4)), and the administrative conduct of the procedures.

"The fees are fixed and cannot be adjusted."

  • Reality: The fees are subject to implementing acts under Article 40(5) and must be proportionate to estimated costs. If costs change or the volume of work shifts, the fee structure is designed to reflect these changes to maintain the cost-recovery balance.

Related

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