Summary Under the proposed Cloud and AI Development Act (CADA), a "participating entity" is a specific category of public-sector body or selected partner authorised to join the European Commission's centralised procurement framework for cloud, AI, and data centre services. Defined in Article 37(1), this status encompasses Union entities, Member State contracting authorities, and partner organisations selected by the Commission. By acceding to the agreement under Article 38, these entities can pool their purchasing power to access centrally negotiated contracts, bypassing individual tender procedures while remaining compliant with EU public procurement law.

Detail

The Cloud and AI Development Act (CADA), as proposed in COM(2026) 502 final, introduces a transformative mechanism to strengthen Europe's cloud and AI ecosystem. A core component of this proposal is Chapter IV, which empowers the European Commission to act as a central purchasing body. This framework allows public authorities to overcome fragmentation and leverage collective buying power to reduce dependencies on non-European providers. The legal definition, scope, and operational mechanics of who can benefit from this mechanism are strictly defined in Article 37.

Who qualifies as a participating entity?

According to Article 37(1) of the CADA proposal, the term "participating entity" is not a generic label for any public body but a specific legal status granted to three distinct categories of organisations:

  1. Union Entities: This category includes all Union institutions, bodies, offices, and agencies. These entities are inherently part of the framework, as the Commission is already mandated to procure on their behalf under the Financial Regulation. Under CADA, their participation is formalised within this specific central purchasing chapter.
  2. Contracting Authorities of Member States: This refers to public authorities in EU Member States that procure cloud computing services, data centre services, software, and AI systems. Article 37(2) clarifies that these authorities may participate on their own behalf or, where they qualify under Directive 2014/24/EU, as central purchasing bodies themselves.
  3. Partner Organisations: This is a unique category introduced by CADA. Article 37(1) explicitly states that the Commission may extend participation to "partner organisations selected by the Commission." This is a derogation from the standard rules in the Financial Regulation (Regulation (EU, Euratom) 2024/2509), allowing the Commission to include specific non-standard entities to achieve strategic procurement goals.

The Legal Basis and Accession Process

The participation of these entities is not automatic; it is governed by a formal agreement. Article 38(1) mandates that before any procurement activity is carried out, the Commission and at least two Member States must enter into an agreement laying down the practical arrangements. This agreement serves as the mandate for the Commission to procure on behalf of the participating entities.

Article 37(3) elaborates on the Commission's operational role, stating it may act as a central purchasing body by:

  • Procuring services on behalf of, or in the name of, one or more contracting authorities and partner organisations.
  • Concluding framework contracts or operating dynamic purchasing systems for services intended for the participating entities.
  • Acting as a wholesaler by acquiring such services and supplies and reselling them, or in exceptional circumstances, donating them to participating entities.

Once an entity accedes to the agreement under Article 38(6), it is considered a "participating entity" in the procedures in which it elects to participate. This status is legally significant because, under Article 39(1), a participating entity is deemed to have fulfilled its obligations under applicable Union public procurement law when it acquires supplies or services through contracts awarded by the Commission under this Chapter. This "deemed compliance" mechanism is designed to remove legal uncertainty and administrative burden for national authorities.

Rights, Obligations, and Governance

Participating entities benefit from streamlined access to technologies but must adhere to the framework's governance structure. Article 38(4) establishes a Steering Committee composed of the Commission and one representative from each participating Member State at the national level. This committee is responsible for the strategic oversight of procurement activities, including proposing the strategic direction of the procurement agenda and approving the strategic direction of each procedure before it is launched.

While the Commission retains responsibility for the operation and management of procurement activities, including the award of contracts, the Steering Committee ensures that the agenda reflects the collective needs of the participating entities. Article 37(5) further allows the Commission to provide ancillary support to participating entities, such as technical infrastructure, advice on preparing procedures, and invoicing services. Article 38(10) notes that accession to the agreement may be conditional on participating entities accepting one or more of these ancillary support services.

Financial Implications

Participation in the CADA central procurement framework is not free. Article 40 stipulates that the costs arising from the procurement activities are jointly financed by the participating entities through fees levied by the Commission. These fees are set at a level sufficient to cover all direct and indirect costs incurred by the Commission, including the development of the common procurement platform. Article 40(3) clarifies that revenues generated by these fees constitute internal assigned revenues within the meaning of the Financial Regulation, assigned specifically to cover the costs of the procurement activities.

What this means for you

For public-sector procurement officers, legal counsels, and IT directors in Member States, understanding the status of a "participating entity" is critical for leveraging the CADA framework to reduce dependencies on non-European cloud providers and streamline AI adoption.

  • Streamlined Procurement: By becoming a participating entity, your authority can bypass complex national tender processes for standard cloud, AI, and data centre services. You simply accede to the Commission's agreement under Article 38 and purchase from the awarded framework contracts or dynamic purchasing systems. This significantly reduces time-to-market and administrative overhead.
  • Compliance Assurance: Under Article 39(1), using the Commission's centralised contracts means you are deemed to have complied with EU public procurement directives. This provides a robust legal shield against challenges regarding the procurement procedure itself, provided the initial agreement is valid.
  • Strategic Alignment: Participation aligns your procurement with EU strategic goals, such as increasing the market share of European cloud providers and ensuring sovereignty. The framework allows for the inclusion of "Union added value" criteria (Article 32) that prioritise services strengthening the EU's digital supply chain, which participating entities can leverage in their specific purchases.
  • Cost Considerations: Be aware that fees will be levied to cover the Commission's operational costs (Article 40). However, these are designed to be proportionate and are often offset by the economies of scale achieved through joint procurement, potentially lowering the unit price of services compared to individual national tenders.
  • Ancillary Services: You may access additional support, such as technical infrastructure for contract management and expert advice on AI procurement, which can be particularly valuable for authorities with limited in-house expertise. Article 37(5) explicitly lists these support services, which can be a condition of accession.

Common misconceptions

Misconception 1: Any public authority can automatically participate.

  • Reality: While Member State contracting authorities have the right to participate, they must actively accede to the specific agreement outlined in Article 38. Partner organisations, in particular, do not have an automatic right; they must be explicitly selected by the Commission.

Misconception 2: Participating entities lose all control over procurement.

  • Reality: The Commission manages the procedure (the tender), but participating entities retain the choice of which contracts to buy from the resulting framework. Furthermore, the Steering Committee (Article 38(4)) provides strategic oversight, ensuring that the procurement agenda aligns with the needs of the participating Member States and entities.

Misconception 3: Participation is free of charge.

  • Reality: The framework is funded by fees levied on participating entities (Article 40). These fees cover the Commission's costs for running the procurement activities and maintaining the platform. The proposal explicitly states that these fees must cover the verifiable costs incurred.

Misconception 4: Only cloud services are covered.

  • Reality: Article 37(1) explicitly includes data centre services, software, and AI systems in the scope of procurement activities available to participating entities. The framework is designed to cover the entire digital stack.

Misconception 5: Partner organisations are private companies.

  • Reality: While the text does not explicitly define "partner organisations" as exclusively public, the context of Article 37(1) and the derogation from the Financial Regulation suggests they are specific entities selected for strategic reasons, distinct from standard contracting authorities. They are not a general category for any private vendor.

Related

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