Summary Under Article 37 of the proposed Cloud and AI Development Act (CADA), the European Commission would be empowered to procure data centre services, cloud computing services, software, and AI systems. As proposed, the Commission can carry out these procurement activities for itself, for other Union entities, and for contracting authorities from Member States, acting as a central purchasing body. This framework would allow participating public bodies to leverage the Commission's collective buying power while adhering to specific exceptions within the EU Financial Regulation.

Detail

The proposed Cloud and AI Development Act (CADA) introduces a significant shift in how public sector bodies across the European Union can access digital infrastructure and artificial intelligence solutions. A central pillar of this proposal is Title IV, Chapter IV, which establishes a framework for the Commission to act as a central purchasing body. This mechanism is designed to overcome common barriers faced by individual public authorities, such as limited financial resources, reduced purchasing power, and insufficient technical or procurement expertise.

Scope of Procurement

According to Article 37(1), the Commission would be authorized to procure four specific categories of digital services and systems:

  1. Data centre services
  2. Cloud computing services
  3. Software
  4. AI systems

These procurements would be conducted for three distinct groups:

  • The Commission itself.
  • Union entities (institutions, bodies, offices, and agencies).
  • Contracting authorities from Member States.

The proposal explicitly states that these activities would be carried out in accordance with the Financial Regulation (Regulation (EU, Euratom) 2024/2509), subject to the exceptions set out in Chapter IV of CADA. This legal basis allows the Commission to extend its central purchasing capabilities beyond its traditional inter-institutional role to include national public authorities.

Acting as a Central Purchasing Body

Article 37(3) clarifies the Commission's role by allowing it to act as a central purchasing body for Member State contracting authorities and partner organizations selected by the Commission. This can be achieved through two primary methods:

  • Procurement on behalf of or in the name of entities: The Commission can conclude framework contracts or operate dynamic purchasing systems for services intended for participating entities.
  • Acting as a wholesaler: The Commission can acquire services and supplies and resell them to Member State contracting authorities. In exceptional circumstances, it may also donate them.

Ancillary Support Services

Beyond the direct procurement of goods and services, Article 37(4) enables the Commission to provide ancillary support to participating entities. This support is crucial for public bodies that may lack in-house expertise in complex cloud or AI procurement. Such support may include:

  • Technical infrastructure enabling entities to use awarded contracts.
  • Advice and support on preparing and implementing procurement procedures.
  • Preparation and conduct of procurement procedures on behalf of the entities.
  • Invoicing and other administrative services related to awarded contracts.

This support can be provided directly by the Commission, through a subcontractor, or by delegation to Union bodies or agencies. Accession to the procurement agreement may be subject to the acceptance of one or more of these ancillary services.

Governance and Participation

The procurement activities would be governed by an agreement between the Commission and at least two Member States, as outlined in Article 38. This agreement would establish a Steering Committee composed of the Commission and representatives of participating Member States. The Steering Committee would be responsible for strategic oversight, including proposing the strategic direction of the procurement agenda. However, the operational management of the procurement activities, including the launch of procedures and award of contracts, would remain the responsibility of the Commission.

Participating entities, defined in Article 37(1) to include contracting authorities of Member States, Union entities, and partner organizations selected by the Commission, would benefit from this centralized approach. The framework aims to harness economies of scale and benefit sharing, enabling smaller public authorities to access high-quality, secure, and innovative cloud and AI solutions that might otherwise be out of reach.

What this means for you

For public-sector procurement officers, the provisions in Article 37 of CADA present a significant opportunity to streamline the acquisition of complex digital technologies.

  • Reduced Administrative Burden: By allowing the Commission to act as a central purchasing body, national authorities can bypass some of the most resource-intensive aspects of public procurement. The Commission can handle the preparation and conduct of procedures, reducing the need for specialized in-house procurement teams for every individual contract.
  • Access to Collective Bargaining Power: Individual Member State contracting authorities often struggle to negotiate favorable terms with large cloud and AI providers due to their relatively small market share. By pooling demand through the Commission, participating entities can leverage collective buying power to secure better prices, terms, and conditions.
  • Technical Expertise: The availability of ancillary support services means that public bodies can receive expert advice on technical specifications and contract management. This is particularly valuable for emerging technologies like AI, where rapid innovation can outpace internal expertise.
  • Flexibility in Participation: The framework allows for dynamic participation. Article 39(5) permits participating entities to request inclusion in a dynamic purchasing system throughout its validity, subject to Commission approval. This flexibility ensures that authorities can join ongoing procurement processes as their needs evolve, without waiting for a new tender cycle.
  • Cost Recovery: It is important to note that this service is not free. Article 40 specifies that the costs of these procurement activities would be jointly financed by participating entities through fees levied by the Commission. These fees would be set to cover the direct and indirect costs incurred by the Commission, ensuring the sustainability of the central purchasing model.

Common misconceptions

  • Misconception: The Commission will take over all public procurement for cloud and AI in the EU.

    • Reality: The Commission's role is limited to acting as a central purchasing body for entities that choose to participate in the framework established under Article 37. National contracting authorities retain the right to conduct their own procurements, provided they comply with existing EU public procurement directives. Participation in the Commission's framework is voluntary for Member State authorities.

  • Misconception: Any private company can bid directly to the Commission under this framework.

    • Reality: While the Commission procures from the market, the framework is designed for public entities. The "participating entities" are Union entities and Member State contracting authorities. Private companies interact with the Commission as suppliers in response to tenders, but they do not participate in the governance or benefit from the central purchasing arrangement in the same way public bodies do.

  • Misconception: This replaces the need for national public procurement laws.

    • Reality: Article 39(1) states that a participating entity is deemed to have fulfilled its obligations under applicable Union public procurement law when it acquires supplies or services through the Commission's central purchasing activities. However, this does not abolish national laws; rather, it provides a compliant pathway for meeting those obligations through centralized procurement. The Commission's activities are still subject to the general principles of EU procurement law.

Related

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