Summary The EuroCloud Federation is a strictly public-to-public mechanism established under Article 34 of the proposed Cloud and AI Development Act (CADA). It allows Union entities and Member State public bodies to share cloud and data centre capacity. As proposed, private SMEs and startups cannot become members of the Federation. Instead, SMEs engage indirectly by bidding for the large-scale cloud services procured by the Commission on behalf of these public bodies under Article 37. Success depends on monitoring how the Commission structures procurement lots and dynamic purchasing systems (DPS) to ensure accessibility, particularly given the Article 39(5) derogation that allows new participants to join a DPS after launch, and the Article 33(4) target to award 25% of innovation procurement to SMEs.

Detail

The EuroCloud Federation, established under Article 34 of the proposed Cloud and AI Development Act (CADA), is designed to facilitate the sharing of secure, resilient public-sector data centre services and cloud computing services between Union entities and public sector bodies. Its primary goal is to pool resources, increase resilience, and reduce fragmentation in the public sector's use of cloud infrastructure.

For SMEs and startups, it is critical to understand that the Federation is strictly a public-sector cooperation mechanism. Article 34(1) explicitly states that the Federation is open for the participation of "Union entities and public sector bodies on a voluntary basis." Recital 71 further clarifies that "Participation within the EuroCloud Federation should be limited to public entities, without direct participation of a private party." Consequently, an SME cannot "join" the EuroCloud Federation to share its own idle capacity with other public bodies in the same way a government agency might.

However, the Federation creates significant demand signals that SMEs can capture. The public bodies participating in the Federation still need to procure the underlying cloud services, software, and AI systems. This is where Article 37 becomes the critical entry point. This article empowers the Commission to carry out procurement activities for Union entities, contracting authorities of Member States, and partner organisations. The Commission acts as a central purchasing body, bundling demand to negotiate better terms and achieve economies of scale.

Article 37(3) specifies that the Commission may procure data centre services, cloud computing services, software, and AI systems on behalf of these entities by concluding framework contracts or operating dynamic purchasing systems (DPS). These mechanisms are the primary market access points for private providers, including SMEs.

While the Federation itself is public-to-public, the procurement activities outlined in Article 37 are open to the market. The Commission is tasked with ensuring that these procurement procedures are efficient and effective. Article 39(5) introduces a specific derogation from the Financial Regulation, allowing participating entities to request to join a dynamic purchasing system throughout its period of validity, subject to Commission approval. Crucially, Article 39(6) clarifies that this possibility is available only to participating entities that accede to the agreement referred to in Article 38 after the dynamic purchasing system has been launched. This mechanism allows startups that develop innovative solutions after a framework is established to still enter the pool of suppliers for future calls-off contracts, provided they first accede to the central procurement agreement.

Furthermore, CADA emphasizes the importance of supporting smaller operators. Article 33 requires Member States to monitor their use of procurement of innovation in cloud and AI. Article 33(4) sets a specific objective: Member States shall pursue the goal that "at least 25% of their procurement for cloud computing services and AI systems be awarded to innovative SMEs." While this article primarily targets Member States, the spirit of fostering SME participation in innovation procurement aligns with how the Commission may structure its central procurement activities under Article 37.

Article 33(2) mandates that Member States take measures to support the design of simplified, proportionate and SME-friendly procurement strategies, "including division into lots, where appropriate." Similarly, Article 33(5) obliges Union entities and contracting authorities to promote "matchmaking between public buyers and innovative solutions provided by European SMEs and start-ups." These provisions create a regulatory environment where large central procurements are expected to be structured to allow SME participation, rather than being dominated solely by hyperscalers.

The Commission may also provide ancillary support to participating entities, including technical infrastructure and advice on preparing procurement procedures, as detailed in Article 37(4). This support can help ensure that the resulting tenders are accessible to a broader range of providers.

What this means for you

If you are an SME or startup providing cloud or AI services, you cannot become a member of the EuroCloud Federation. However, you should treat the Federation's activities as a major market opportunity. Here is how to engage:

  1. Monitor Commission Procurement Portals: Since the Commission acts as the central purchasing body under Article 37, keep a close watch on the TED (Tenders Electronic Daily) portal and the Commission's procurement pages for framework contracts and dynamic purchasing systems related to cloud and AI services.
  2. Leverage Dynamic Purchasing Systems (DPS): Article 39(5) allows for new participants to join a DPS during its validity, provided they accede to the Article 38 agreement. This is a key mechanism for startups. If you develop a new, innovative cloud solution after a framework contract is awarded, you may still be able to join the DPS to bid for specific calls-off contracts, provided you meet the technical specifications and the Commission approves your request.
  3. Watch Lot Structures: Large central procurements can be intimidating for SMEs due to the scale. Pay attention to how the Commission divides contracts into lots. CADA encourages measures that improve SME access to procurement markets, including division into lots where appropriate (Article 33(2)). Bidding for smaller, specialized lots may be more feasible than competing for the entire framework.
  4. Prepare for Innovation Procurement: Article 33 highlights the importance of procurement of innovation, with a target of 25% of such procurement awarded to innovative SMEs (Article 33(4)). If your startup offers a novel cloud or AI solution, position your offerings as innovative. The Commission and Member States are encouraged to facilitate matchmaking between public buyers and innovative solutions provided by European SMEs and start-ups (Article 33(5)).
  5. Ensure Sovereignty Compliance: To be eligible for these contracts, your services will likely need to meet the Union assurance levels defined in CADA. Ensure your cloud services can demonstrate compliance with the relevant sovereignty criteria (e.g., data residency, control) to be recognized in the central repository under Article 22.

Common misconceptions

  • Misconception: "My startup can join the EuroCloud Federation to share our cloud capacity."
    • Reality: The EuroCloud Federation is exclusively for Union entities and public sector bodies. Private companies, including SMEs, cannot be members. You engage by selling services to the members, not by joining the federation.
  • Misconception: "Central procurement under Article 37 is only for hyperscalers."
    • Reality: While large contracts are involved, the framework includes mechanisms like dynamic purchasing systems, lot division, and innovation targets designed to facilitate SME participation. The Commission's role as a central purchasing body can actually lower barriers to entry by providing clear, standardized procurement procedures.
  • Misconception: "The EuroCloud Federation replaces national procurement."
    • Reality: The Federation facilitates sharing and common procurement, but Member States still have their own procurement processes. The Commission's activities under Article 37 are an additional layer, not a replacement, and are voluntary for Member State contracting authorities to join.
  • Misconception: "Startups can join a DPS at any time without conditions."
    • Reality: Under Article 39(5) and (6), the ability to join a DPS during its validity is restricted to entities that accede to the Article 38 agreement after the DPS has been launched. You must first become a participating entity in the central procurement framework.

Related

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