FAR 34.005-4—Demonstration contracts.
Plain-English Summary
FAR 34.005-4 addresses how contracting officers should structure demonstration-phase contracts when an agency is evaluating a system or concept before committing to full-scale development. It covers two main topics: first, the preference that, whenever practicable, the demonstration contract require the contractor to submit a priced proposal for full-scale development by the end of the demonstration phase; and second, the contracting officer’s duty to give the contractor the information needed to prepare that proposal, including operational test conditions, performance criteria, life cycle cost factors, and any other selection criteria. The purpose of the section is to make the transition from demonstration to development more disciplined, comparable, and cost-informed, rather than leaving the Government to negotiate the next phase with incomplete information. In practice, this means the demonstration phase should be designed not just to prove technical feasibility, but also to generate a credible basis for selecting a contractor for the next phase. The requirement that the proposal be “totally funded by the Government” reflects that the Government should bear the cost of obtaining the proposal as part of the demonstration effort, rather than shifting that burden to the contractor. This section is especially important in research, prototype, and advanced development efforts where agencies need a fair, structured way to compare competing approaches before awarding full-scale development.
Key Rules
Plan for next-phase pricing
Whenever practicable, the demonstration contract should require the contractor to submit a priced proposal for full-scale development at the end of the demonstration phase. The goal is to have a concrete, comparable basis for deciding whether and how to proceed.
Government funds the proposal effort
The priced proposal for full-scale development is to be totally funded by the Government. In practice, the agency should structure the demonstration phase so the contractor is compensated for preparing the proposal rather than absorbing that cost.
Provide evaluation criteria early
The contracting officer should give the contractor the operational test conditions, performance criteria, life cycle cost factors, and any other selection criteria needed to prepare the proposal. This ensures the contractor knows what the Government will use to assess the next-phase offer.
Use practicable judgment
The requirement is conditioned on what is practicable, so the contracting officer has discretion to determine whether a priced proposal requirement makes sense for the particular demonstration effort. If it is not feasible, the file should support that judgment.
Support fair competition and selection
The section is intended to make the transition from demonstration to full-scale development more objective and transparent. Clear criteria help the Government compare proposals and reduce the risk of disputes over what was expected.
Responsibilities
Contracting Officer
Decide whether it is practicable to require a priced proposal for full-scale development at the end of the demonstration phase, and if so, include that requirement in the contract. Provide the contractor with operational test conditions, performance criteria, life cycle cost factors, and any other selection criteria needed to prepare the proposal.
Contractor
Use the Government-provided test conditions, performance criteria, cost factors, and selection criteria to prepare a priced proposal for full-scale development by the end of the demonstration phase, if the contract requires one.
Agency
Structure the demonstration effort so the Government funds the proposal preparation when required and so the demonstration phase produces information useful for the full-scale development decision.
Practical Implications
This section helps agencies avoid starting the next phase with vague expectations; the contractor should know what success looks like before the demonstration ends.
A common pitfall is failing to provide enough evaluation detail, which can lead to proposals that are hard to compare or do not address the Government’s real decision factors.
Another risk is treating the demonstration phase as purely technical and forgetting to plan for the transition to full-scale development.
Contracting officers should document why a priced proposal requirement is or is not practicable, especially when the agency chooses not to use this approach.
Contractors should pay close attention to life cycle cost and operational criteria, not just technical performance, because those factors may drive the selection decision.
Official Regulatory Text
Whenever practicable, contracts for the demonstration phase should provide for contractors to submit, by the end of the phase, priced proposals, totally funded by the Government, for full-scale development. The contracting officer should provide contractors with operational test conditions, performance criteria, life cycle cost factors, and any other selection criteria necessary for the contractors to prepare their proposals.