Summary The proposed Cloud and AI Development Act (CADA) does not create a new mechanism called "pre-commercial procurement" (PCP); rather, it mandates Member States to actively promote the participation of SMEs in existing PCP mechanisms and the innovation procedure under Directive 2014/24/EU. As proposed in Article 33(2), Member States must take measures to support the design of simplified, SME-friendly strategies and promote participation in these specific procedures for cloud and AI systems. Furthermore, Article 33(4) sets a strategic objective for Member States to ensure that at least 25% of their total procurement for cloud computing services and AI systems is awarded to innovative SMEs, a target that applies to the broader scope of cloud/AI procurement, not just innovation-specific procedures.

Detail

The Cloud and AI Development Act (CADA), as proposed in COM(2026) 502 final, aims to strengthen the EU's cloud and AI ecosystem by reducing dependencies on non-European providers and fostering domestic innovation. A critical lever for achieving this is the modernization of public procurement. While traditional procurement often focuses on mature, off-the-shelf solutions, CADA seeks to unlock the potential of early-stage technologies through the strategic use of pre-commercial procurement (PCP) and the innovation procedure.

It is essential to clarify a common misconception: CADA does not introduce pre-commercial procurement as a new legal instrument. PCP is a well-established concept under existing EU law, specifically Directive 2014/24/EU (and its predecessor directives), which allows public authorities to procure research and development services before a product is commercially available. CADA's role is to reinforce and mandate the promotion of these existing tools specifically for cloud and AI, with a sharp focus on enabling Small and Medium-sized Enterprises (SMEs) to participate.

The Mandate in Article 33

The core of CADA's innovation procurement strategy is found in Article 33, titled "Monitoring of procurement of innovation in cloud and AI." This article establishes a framework for Member States to monitor, report on, and actively improve their use of innovation procurement.

Article 33(2) explicitly outlines the measures Member States must take to improve SME access. The text states that Member States shall take appropriate measures to:

  • Identify barriers to SME participation in procurement procedures.
  • Improve access of SMEs to procurement markets.
  • Support the design of simplified, proportionate, and SME-friendly procurement strategies, including the division into lots.
  • Promote the participation of SMEs in the innovation procedure foreseen under Directive 2014/24/EU and pre-commercial procurement of cloud computing services and AI systems.

The phrasing is precise: the mandate is not merely to "do" pre-commercial procurement, but to promote the participation of SMEs in it. This distinction is vital. The regulation recognizes that while the legal mechanisms for PCP exist, SMEs often face disproportionate barriers to entry. CADA requires Member States to actively remove these barriers and encourage SMEs to engage in these high-risk, high-reward procurement pathways.

The 25% Target: Scope and Application

A significant provision in Article 33(4) sets a clear, aspirational objective for Member States. The text states: "Member States shall pursue as objective that at least 25% of their procurement for cloud computing services and AI systems be awarded to innovative SMEs."

It is crucial to understand the scope of this target. The regulation does not limit this 25% figure to "innovation procurement" or "pre-commercial procurement" alone. Instead, it applies to all procurement for cloud computing services and AI systems. This means that whether a public body is buying a mature cloud service, a new AI model, or engaging in a pre-commercial R&D project, the aggregate result across all such procurement activities should aim for a 25% share awarded to innovative SMEs.

This broad scope transforms the target from a niche goal for experimental projects into a systemic requirement for the entire cloud and AI procurement market. To achieve this, Member States are required to include plans in their national cloud and AI strategies (under Article 7) detailing how they intend to reach this objective.

Why Pre-Commercial Procurement Matters for Cloud and AI

Cloud and AI technologies evolve at a pace that often outstrips traditional procurement cycles. By the time a standard tender is completed, the technology may be obsolete. Pre-commercial procurement addresses this by allowing public authorities to engage with suppliers during the research and development phase.

For the public sector, this offers:

  • Tailored Sovereign Solutions: Authorities can define specific needs, such as sovereign cloud infrastructure or secure AI algorithms for law enforcement, and co-develop solutions that meet these exact requirements, rather than adapting to generic commercial products.
  • Risk Sharing: By funding the R&D phase, public authorities share the financial risk with suppliers. This is particularly attractive for SMEs and start-ups that may lack the capital to invest heavily in R&D without a guaranteed first customer.
  • Early Integration of Sovereignty: Engaging early allows for the integration of CADA's Union Assurance Levels (sovereignty criteria) from the design phase, ensuring that security and autonomy requirements are built-in rather than retrofitted.

Monitoring and Reporting

To ensure these measures are effective, Article 33 establishes a robust reporting framework. Member States must report annually to the Commission on:

  • The size of economic operators participating in such procurement.
  • SME participation trends, including the number of contracts awarded to SMEs and their share of total contract value.
  • Measures taken to improve SME access.

This data allows the Commission to assess whether the promotion of PCP and the innovation procedure is successfully driving SME participation and to provide guidance where barriers persist.

What this means for you

For public-sector procurement officers and policy makers, the proposed CADA provisions signal a shift towards a more strategic, innovation-driven purchasing approach.

  1. Reframe Your Strategy: Do not view pre-commercial procurement as a separate, exotic tool. View it as a primary vehicle for meeting the 25% SME target mandated in Article 33(4).
  2. Promote Participation, Not Just Procedures: Your focus should be on actively removing barriers for SMEs. This includes dividing large contracts into smaller lots, simplifying administrative requirements, and providing technical support, as required by Article 33(2).
  3. Leverage Existing Tools: You do not need to wait for CADA to be adopted to use the innovation procedure or PCP. These are already available under Directive 2014/24/EU. CADA simply mandates that you use them more aggressively for cloud and AI to support SMEs.
  4. Track Your Data: Ensure your internal systems can track the share of cloud and AI procurement awarded to innovative SMEs. This data is essential for your national reporting obligations under Article 33.
  5. Collaborate: Consider joining joint procurement initiatives or the EuroCloud Federation (under Article 34) to pool resources. This can make the financial risk of pre-commercial procurement more manageable for individual authorities while increasing the market size for SMEs.

Common misconceptions

Misconception 1: CADA creates a new "Pre-Commercial Procurement" law.

  • Reality: CADA does not create PCP. PCP is an existing mechanism under Directive 2014/24/EU. CADA's Article 33(2) merely mandates that Member States promote SME participation in this existing mechanism for cloud and AI.

Misconception 2: The 25% SME target only applies to innovation procurement.

  • Reality: Article 33(4) sets the target for all procurement for cloud computing services and AI systems. It is a broad market objective, not a narrow one limited to R&D projects.

Misconception 3: Pre-commercial procurement bypasses public procurement rules.

  • Reality: PCP must still comply with EU public procurement rules. However, specific procedures like the innovation procedure and Research and Innovation Partnerships (RIPs) offer flexibility to accommodate the uncertainties of R&D, which is why CADA encourages their use.

Misconception 4: Only large corporations can benefit from CADA's procurement measures.

  • Reality: The entire thrust of Article 33 is to level the playing field for SMEs. The measures to promote participation in PCP and the innovation procedure are specifically designed to help smaller, innovative European providers compete against global hyperscalers.

Related

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