Summary Under the proposed Cloud and AI Development Act (CADA), the European Commission would be empowered to act as a "wholesaler" of cloud computing services, software, and AI systems for Member State contracting authorities. As proposed in Article 37(3)(b), this model allows the Commission to acquire these digital supplies and resell them to public bodies, or, in exceptional circumstances, donate them. This mechanism is distinct from the Commission's role as a central purchasing body that establishes framework contracts or dynamic purchasing systems, offering a direct procurement and distribution channel to leverage collective buying power and standardize access to critical digital infrastructure.

Detail

The Cloud and AI Development Act (CADA), proposed in COM(2026) 502 final, introduces a comprehensive framework to strengthen the EU's cloud and AI ecosystem. A significant component of this framework is the enhancement of joint procurement mechanisms to reduce dependencies on third-country providers and increase the market share of European cloud services. Central to this effort is Article 37, which expands the Commission's procurement powers to support Member States.

The Wholesaler Model vs. Central Purchasing Body

While the Commission already acts as a central purchasing body under Article 168 of the Financial Regulation (Regulation (EU, Euratom) 2024/2509), CADA introduces a specific "wholesaler" function. Article 37(3)(b) explicitly states that the Commission may act as a wholesaler by "acquiring such services and supplies and reselling them or, in exceptional circumstances, donating them to one or more contracting authorities of Member States."

This creates a distinct procurement pathway compared to the standard central purchasing body model. In a traditional central purchasing body scenario under Article 37(3)(a), the Commission concludes framework contracts or operates dynamic purchasing systems on behalf of participating entities. The participating entities then "call off" contracts from these frameworks, maintaining a direct contractual link with the supplier for the specific delivery.

In contrast, the wholesaler model involves the Commission taking direct ownership or control of the acquired services and supplies before distributing them. The Commission enters into a contract with the supplier, acquires the service, and then enters into a separate transaction (sale or donation) with the Member State authority. This allows for a more centralized management of supply chains, potentially achieving greater economies of scale and ensuring uniform quality standards across participating Member States. It effectively creates a "stock and sell" dynamic where the Commission acts as an intermediary holding the asset before transfer.

Scope of Services and Supplies

The services and supplies covered by this wholesaler function are broad, aligning with CADA's objective to foster the adoption of sovereign and secure digital solutions across the public sector. As defined in Article 37(1) and (3), the scope includes:

  • Data centre services
  • Cloud computing services
  • Software
  • AI systems

By bundling these elements, the Commission can address complex procurement needs that individual Member States might struggle to manage efficiently due to limited technical expertise or financial resources. This is particularly relevant for the deployment of sovereign cloud offers and frontier AI systems, where market fragmentation often hinders access.

Exceptional Circumstances for Donation

A unique and flexible feature of the wholesaler model is the provision for donation. Article 37(3)(b) notes that the Commission may donate services and supplies "in exceptional circumstances." While the text does not define these circumstances in detail, this provision offers flexibility for scenarios such as humanitarian aid, crisis response, or supporting Member States with limited budgets to access critical digital infrastructure.

This donation power complements the broader CADA goal of ensuring balanced geographic deployment of computing capacity and preventing digital divides within the Union. It allows the Commission to act as a safety net, ensuring that essential digital services remain available to public bodies even when financial constraints or emergency situations prevent standard procurement.

Governance and Participation

The wholesaler activities are governed by a specific agreement between the Commission and at least two Member States, as outlined in Article 38. This agreement establishes a Steering Committee composed of the Commission and representatives of participating Member States. The Steering Committee provides strategic oversight, including the strategic direction of the procurement agenda, but the Commission retains responsibility for the operational management of procurement activities, including the award of contracts.

Participating entities, which include Member State contracting authorities, Union entities, and partner organizations selected by the Commission, contribute to the costs through fees levied by the Commission (Article 40). These fees are designed to cover the direct and indirect costs incurred by the Commission, ensuring the model is financially sustainable without relying heavily on the general EU budget. The fees are set at a level sufficient to cover costs, reflecting practices of comparable procurement frameworks.

Legal Basis and Derogations

The Commission's ability to act as a wholesaler is supported by derogations from the Financial Regulation. Article 37(1) allows the Commission to carry out procurement activities for Member State contracting authorities, subject to specific exceptions. This legal flexibility is crucial for enabling the Commission to operate outside standard national procurement procedures, thereby streamlining the acquisition and distribution process.

Furthermore, Article 39 clarifies that participating entities are deemed to have fulfilled their public procurement obligations when they acquire services through the Commission, provided they comply with the initial contractual provisions. This legal certainty is vital for public bodies, as it removes the need to run parallel national tender procedures for services procured via the Commission's wholesaler or central purchasing mechanisms.

What this means for you

For public-sector procurement officers and IT directors, the Commission's role as a wholesaler under CADA presents a new, streamlined avenue for acquiring cloud and AI services. Here is how it impacts your operations:

  • Simplified Procurement: You can bypass complex national tender processes for standard cloud and AI services by purchasing directly from the Commission's wholesale pool. This significantly reduces administrative burden and accelerates the deployment of critical digital infrastructure.
  • Cost Efficiency: By leveraging the Commission's aggregated demand, you may access services at more favorable rates than those available through individual national tenders. The fee structure is designed to cover costs, but the underlying procurement power often yields better pricing due to economies of scale.
  • Access to Innovative Solutions: The wholesaler model can provide access to cutting-edge AI systems and sovereign cloud services that might be difficult to procure independently, particularly for smaller authorities with limited technical expertise or bargaining power.
  • Compliance Assurance: Purchasing through the Commission's framework ensures compliance with EU public procurement rules. Article 39 explicitly deems such acquisitions as fulfilling your obligations under Directive 2014/24/EU, provided the initial contractual provisions are respected.
  • Donation Opportunities: In exceptional cases, such as during crises or for specific public interest projects, you may be eligible to receive donated cloud services or AI tools, reducing upfront costs and ensuring continuity of essential services.

Common misconceptions

Misconception: The wholesaler model replaces framework contracts.

  • Reality: The wholesaler model is an additional option, not a replacement. Article 37(3)(a) still allows the Commission to conclude framework contracts and operate dynamic purchasing systems. The wholesaler function (Article 37(3)(b)) is a distinct mechanism where the Commission acquires and resells/donates, rather than just facilitating access via frameworks.

Misconception: All Member States must participate.

  • Reality: Participation is voluntary. Article 37(1) and Article 38(6) indicate that contracting authorities may accede to the agreement and participate in procedures as they choose. The Steering Committee sets conditions for accession, but there is no mandatory universal participation.

Misconception: The Commission bears all costs.

  • Reality: The model is cost-recovery based. Article 40(1) states that costs are jointly financed by participating entities through fees levied by the Commission. These fees are set to cover direct and indirect costs, ensuring the initiative is financially self-sustaining.

Misconception: Donation is a standard practice.

  • Reality: Donation is permitted only "in exceptional circumstances" (Article 37(3)(b)). It is not a routine feature of the wholesaler model but a flexible tool for specific, justified cases, such as emergencies or support for under-resourced authorities.

Related

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