Summary As proposed, the Cloud and AI Development Act (CADA) would mandate that public-sector contracting authorities include a specific "Union added value" criterion when evaluating tenders for cloud computing services and AI systems. This is not a voluntary preference but a binding requirement designed to leverage public purchasing power to strengthen the European digital supply chain and reduce strategic dependencies. Article 32(1) explicitly requires authorities to evaluate a tenderer's contribution to the development of a European cloud and AI ecosystem. Crucially, Article 32(3)(c) highlights that this evaluation must consider how the innovation contributes to "strengthening the security of supply." This mechanism is a central pillar of the EU's broader technology sovereignty agenda, ensuring that public spending actively fosters a resilient, homegrown digital infrastructure rather than merely selecting the lowest-cost option.

Detail

The proposed Cloud and AI Development Act (CADA) represents a paradigm shift in how the European Union approaches public procurement for critical digital infrastructure. While traditional procurement frameworks often prioritize the lowest price or basic technical compliance, CADA introduces a structured, mandatory mechanism to favor solutions that contribute to the Union's long-term strategic interests. At the heart of this approach is the "Union added value" criterion, a non-price award factor that transforms public procurement from a simple purchasing exercise into a strategic tool for industrial policy and sovereignty.

The Legal Basis: Article 32

The core provision governing this requirement is Article 32 of the proposed regulation. Article 32(1) establishes a clear obligation: in public procurement procedures for innovative cloud computing services and AI systems, contracting authorities "shall include, as part of the quality evaluation of the tender, non-price award criteria that allow them to evaluate the tenderer's contribution to the development of a European cloud and AI ecosystem."

This language is imperative ("shall include"), indicating that the criterion is mandatory for relevant procurements. The regulation aims to ensure that the significant purchasing power of the public sector is leveraged to foster technological independence and innovation within the EU. By embedding this requirement directly into the evaluation phase, CADA ensures that the development of the European ecosystem is a primary consideration alongside cost and performance.

Defining "Union Added Value" and Its Constraints

To prevent arbitrary decision-making and ensure the criterion remains compatible with internal market principles, Article 32(2) sets out strict conditions for its application. The criterion must be:

  • Linked to the subject matter of the contract;
  • Not conferring unrestricted freedom of choice on the contracting authority;
  • Expressly set out in the procurement documents or contract notice; and
  • "Ancillary and not decisive in the award of the contract."

This last condition is critical. It means that while Union added value is a required part of the evaluation, it cannot override core technical and financial criteria. The primary focus of the procurement must remain on the performance, quality, and cost-effectiveness of the service. The Union added value criterion acts as a differentiator among bids that are otherwise technically and financially comparable, ensuring that the strategic benefit of supporting the EU ecosystem is recognized without compromising the fundamental principles of public procurement.

Article 32(3) provides a detailed, non-exhaustive list of factors that contracting authorities may use to evaluate this added value. These factors are designed to measure tangible contributions to the EU's digital infrastructure and strategic autonomy:

  1. Supply Chain Strengthening: Authorities may evaluate the extent to which the tenderer contributes to strengthening the digital technology supply chain in the Union. This includes the use of software or hardware designed or manufactured in the Union.
  2. Integration of EU Technologies: The evaluation may assess whether the tenderer has integrated technologies developed in the Union. This encompasses research and development results stemming from Union-funded programs, as well as the use of tools, standards, specifications, software, models, or other technology developed within the EU.
  3. Security of Supply: Article 32(3)(c) specifically authorizes authorities to evaluate how the innovation required to deliver the service contributes to "strengthening the security of supply and the development of a European cloud and AI ecosystem." This clause directly addresses the strategic rationale behind the regulation: reducing reliance on external, potentially volatile supply chains that could jeopardize public order or economic security.
  4. Hardware Origin: Authorities may assess whether the service is delivered, to the greatest extent feasible, through critical computing, storage, and networking hardware components designed and/or manufactured in the Union. If this is not feasible due to market availability or technical requirements, the criterion allows for hardware from a third country, provided it still contributes to strengthening the security of supply and the development of the European ecosystem.

The Strategic Rationale: Tech Sovereignty and Security of Supply

The inclusion of this criterion is not an isolated technical requirement but a cornerstone of the EU's broader technology sovereignty agenda. The explanatory memorandum of the proposal highlights that the EU currently faces a pronounced dependence on a limited pool of third-country providers for cloud computing services. This dependence creates strategic risks, including vulnerabilities related to data access, operational continuity, and geopolitical leverage.

The security of supply rationale embedded in Article 32(3)(c) reflects the understanding that relying on external providers for critical digital infrastructure poses a threat to public order and economic security. By mandating the evaluation of Union added value, CADA seeks to address these risks proactively. The criterion encourages procurement decisions that favor providers who invest in EU-based infrastructure, employ EU-based personnel, and utilize EU-developed technologies. This creates a virtuous cycle: public procurement drives demand for European solutions, which in turn incentivizes investment and innovation within the EU, ultimately reducing critical external dependencies.

Furthermore, the criterion supports the EU's industrial competitiveness. By rewarding the use of EU-designed hardware and software, the regulation helps create a market for European technology providers, allowing them to scale and compete globally. This is particularly important for smaller EU-based providers who often struggle to compete against well-established global hyperscalers. The Union added value criterion levels the playing field by recognizing the strategic benefit of supporting homegrown innovation, aligning public spending with the goal of building a resilient, sovereign digital ecosystem.

What this means for you

For public-sector procurement officers, the implementation of CADA will require a careful review and update of procurement strategies and tender documents. As the regulation is currently a proposal, authorities should begin preparing for its potential adoption.

  1. Update Tender Documents: You must explicitly include the Union added value criterion in your procurement documents for cloud and AI services. Ensure that the criterion is clearly defined and linked to the specific subject matter of the contract, as required by Article 32(2).
  2. Define Evaluation Metrics: Develop clear, objective metrics for evaluating Union added value. You can use the factors listed in Article 32(3) as a guide. For example, you might assign points based on the percentage of hardware designed in the EU, the use of EU-developed software components, or the tenderer's contribution to the EU digital supply chain.
  3. Ensure Proportionality: Remember that this criterion must be "ancillary and not decisive." Do not allow the Union added value score to override critical technical or financial requirements. The primary goal is still to procure a high-quality, cost-effective service.
  4. Train Your Teams: Procurement officers and evaluation committees need to understand the rationale and mechanics of this new criterion. Training should cover how to assess claims related to EU-designed hardware, the integration of EU technologies, and the contribution to security of supply.
  5. Monitor Compliance: Keep track of how this criterion is applied across your organization to ensure consistency and compliance with the regulation. Be prepared to document your evaluation decisions in case of challenges or audits.

Common misconceptions

Misconception 1: The Union added value criterion is a protectionist measure that excludes non-EU providers. This is incorrect. CADA does not ban non-EU providers. The criterion evaluates the contribution to the European ecosystem. A non-EU provider can still win a contract if they demonstrate a significant contribution, such as using EU-designed hardware, partnering with EU firms, or investing in local infrastructure. The goal is to encourage alignment with EU strategic interests, not to create an impermeable barrier.

Misconception 2: This criterion can be used to favor EU providers regardless of quality or price. No. Article 32(2) explicitly states that the criterion must be "ancillary and not decisive." Technical and financial criteria remain paramount. A tender with high Union added value but poor technical performance or excessive cost should not be awarded the contract. The criterion is a differentiator among otherwise comparable bids, not a substitute for core procurement principles.

Misconception 3: Only large EU hyperscalers can meet this criterion. This is a common concern, but the criterion is designed to be inclusive. Smaller EU providers and startups can demonstrate Union added value through their use of open-source software, EU-designed components, or local innovation. The regulation aims to create opportunities for these smaller players by recognizing the strategic value of their contributions to the EU ecosystem.

Misconception 4: This is a new, standalone legal requirement separate from existing procurement laws. While CADA introduces specific requirements, it operates within the existing framework of EU public procurement law, such as Directive 2014/24/EU. The Union added value criterion is a specific application of the general principle that contracting authorities can include non-price award criteria linked to the subject matter of the contract. CADA simply mandates and standardizes this practice for cloud and AI procurements to ensure consistency across the Union.

Related

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