The U.S. government incentivizes firms to develop innovative technologies by awarding research and development (R\&D) contracts that often carry an implicit promise of guaranteed demand.{''} Firms that demonstrate strong technological capabilities are rewarded with noncompetitive production contracts for the resulting products and services. Using newly assembled data on \$4.2 trillion in government procurement contracts from all federal agencies, matched to U.S. publicly traded firms, we document acrowding-in{''} effect, where government R\&D contracts lead to increased investment in corporate scientific research. This effect is concentrated in large, vertically integrated firms and limited to upstream R\&D. We argue that these patterns are best explained by a guaranteed demand mechanism: Firms co-invest in upstream research when success offers a credible path to future noncompetitive production contracts. We develop a theoretical framework to explain when it is optimal for the government to bundle R\&D and production contracts. Our analysis shows that guaranteed demand can produce higher quality at a lower total cost for upstream R\&D projects when the R\&D firms have production capabilities. Our empirical results support these predictions. Additionally, we find that the crowding-in effect has weakened over time as the government has increasingly decoupled R\&D contracts from production contracts. We discuss the potential implications of this decoupling.