When I've deployed OneDrive, I use the native, unmodified .pkg from Microsoft (or the version included with the Office installer) and it's always defaulted to files on-demand. That said, Microsoft does offer information on how to configure the OneDrive client via Configuration Profile

Thanks, yes. I thought this was how it should work. I am using the unmodified installer but for some reason none of our new machines are showing the FoD feature in preferences. All machines are 10.15.x and APFS so am sure we have met the pre-reqs. Preferences applied via config profile don't seem to force this to become available.

Switching to the App Store version of OneDrive has resolved this issue. Still no understanding why the functionality was not available when deploying the installer package.

@nick-at-artsed Did you deploy a Configuration Profile for the standalone version of OneDrive to configure the settings for FoD referenced in the link @cdev provided? If so, the FoD setting would no longer appear in the OneDrive preference panel so it may in fact have been working. If you stick with the AppStore version note the different domain for settings shown in that document.

Hi @sdagley, I did try to apply a config profile, and where other settings were being applied the FoD features did not appear in Preferences.

@nick-at-artsed As I was saying, if your Configuration Profile sets FoD to be enabled it will no longer appear as an option in the OneDrive preferences. You can verify it is working by selecting a file in your OneDrive folder that shows it is is synchronized then right-click to see if the OneDrive section of the pop-up menu that will be displayed includes "Free Up Space"