The End of the Billet

Why the Defense Services Industry Needs a New Operating Model

The defense services industry has entered one of the most consequential transitions in its history. Yet, many organizations continue to view the changes unfolding around them as isolated acquisition reforms rather than evidence of a fundamental shift in how the Department of War intends to buy capability.

The growing use of Firm-Fixed-Price contracts, State­ments of Objectives, Commercial Solutions Open­ings, phased competitions, Areas of Interest, and rapid capability acquisition programs often appear unrelated because they originate from different organizations and support different procurement strategies. Together, however, they reveal a con­sistent direction. The Department of War no longer wants to buy services from organizations built around Level-of-Effort (LOE) fixed roles. It increas­ingly wants to buy solutions to operational prob­lems and, secondarily, to eliminate the carrying cost of the talent bench.

Most defense services contractors continue to operate under models designed for a different era. Their organizations are structured around labor categories, long-term billets, functional departments, and staffing plans because these structures evolved over decades of Cost-Plus-Fixed-Fee, Time-and-Materials, Labor-Hour, and Fixed-Price Level-of-Effort contracts. Those operat­ing models aligned with the market economics at the time. They no longer align with emerging-mar­ket economics.

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Many executives naturally view this transition as a contracting issue because the most visible changes involve contract type, acquisition strategy, and proposal evaluation. They ask how to lower prices, reduce labor rates, or shift technical risk without sacrificing margin. Those questions matter, but they address symptoms rather than causes. The organizations that will consistently outperform during the next decade will not simply price differently. They will work differently.

This paper argues that the defense services industry needs a new operating model. Contractors must move beyond thinking of work as a collection of permanent positions that require continuous staffing and begin to view it as a continuous stream of customer demand that requires different combinations of expertise over time. Organizations that make that transition will improve responsiveness, reduce structural costs, and capture efficiencies that traditional staffing models cannot achieve. Organizations that fail to adapt will increasingly compete on labor rates while watching execution risk and margin pressure grow.

SMA has operated according to this model for years. We built our business around the ability to precisely match expertise to high-consequence customer demands, release that expertise when the objective has been achieved, and recombine it for the next mission. SMA has now codified that operating philosophy in Talent on Demand® (TOD®), which we discuss later in this paper.

1. The Acquisition System Has Changed the Rules

The Department of War rarely transforms through a single policy decision. Most changes emerge gradually as acquisition organizations experiment with new contracting strategies, adapt to evolving threats, and seek better ways to deliver capabilities to the warfighter. Individual reforms often appear modest when viewed in isolation. Over time, however, they accumulate into something much larger than the sum of their parts.

During the past decade, acquisition organizations have steadily moved away from prescribing how contractors should organize and conduct the work and toward defining the operational outcomes they expect industry to deliver. Statements of Objectives (SOO) increasingly replace detailed Performance Work Statements (PWS). or Statements of Work (SOW). Commercial Solutions Openings describe capability issues rather than labor requirements. Other Transaction Authorities encourage rapid experimentation rather than procedural compliance. Program offices decompose large efforts into Areas of Interest, enabling industry to compete on specific capability problems rather than comprehensive staffing solutions. Even traditional acquisition programs increasingly release work in smaller increments that mature over time rather than attempting to define every requirement before contract award.

These acquisition strategies differ in execution, yet they share a common philosophy. The government increasingly defines the problem while expecting industry to determine the best solution. Nor is the government looking only for solutions that achieve outcomes—it increasingly expects industry to have already invested in the solution it proposes, arriving with mature capability rather than developing it at the government’s expense. That distinction changes the role of the contractor. Success depends less on assembling the organization that the government prescribed and more on designing the organization that best solves the mission problem.

The implications reach well beyond proposal strategy. They challenge the assumptions that have long shaped the defense services industry. Organizations that continue to manage work through permanent labor structures will find themselves increasingly misaligned with customers who now think in terms of mission outcomes, capability increments, and operational effects. The acquisition system has quietly changed the rules of competition. Much of the industry continues to play by the old rules.

2. The Industry Optimized for a Different Economy

Every successful industry eventually organizes itself around the way it earns revenue. Defense services followed that pattern because government contracts rewarded organizations that excelled at recruiting qualified personnel, assigning them to approved labor categories, and maintaining stable staffing over extended performance periods. Managers built their organizations around billets—defined positions tied to specific labor categories, responsibilities, and funded contract roles—because billets represented the unit of work the government purchased. Every important management process naturally evolved around that assumption.

Program managers measured success by filling vacancies and maintaining utilization. Human resources recruited against labor categories rather than capability gaps. Financial organizations forecast revenue by tracking labor hours instead of completed outcomes. Capture teams estimated staffing plans before they estimated how work itself might change. Each individual practice made perfect sense because each aligned with the underlying economics of Cost-Plus and labor-based contracting.

Those practices gradually became institutionalized because they consistently produced acceptable results. Few organizations questioned whether the billet was the best way to organize work, because the government itself largely defined the work in the solicitation. Innovation focused on recruiting faster, reducing turnover, improving utilization, and refining management processes rather than redesigning how work flowed through the enterprise. The industry optimized the existing model because the market rewarded continuous improvement within that model.

The economics have now changed. Contractors increasingly earn profit by delivering outcomes more efficiently than competitors, rather than by supplying labor more efficiently. That distinction appears subtle, but it fundamentally changes what organizations should optimize. The question no longer centers on how quickly a company can fill a billet at the lowest price. It centers on how effectively the company can assemble the right expertise at the right time to solve the customer’s next problem when it needs to be solved.

3. The Billet Has Become the Constraint

The billet once represented stability. Today, it increasingly represents inertia. Every permanent position assumes that tomorrow’s work will closely resemble yesterday’s work, that expertise should remain dedicated to a single contract, and that organizational boundaries should determine how work flows. Modern defense programs rarely behave that way.

Mission priorities shift as operational environments change. Program offices introduce new requirements as threats evolve and technology advances. Customers expect rapid responses to emerging opportunities rather than waiting for annual staffing adjustments. The work itself has become dynamic, even though many organizations remain static.

That mismatch quietly creates waste throughout the enterprise. Highly specialized engineers perform routine work simply because it falls within their assigned role. Cybersecurity experts remain dedicated to one contract while another program urgently needs their expertise. Organizations carry excess staffing capacity to absorb occasional surges even though much of that capacity sits idle during normal operations. Managers create cumbersome coordination mechanisms to overcome organizational boundaries that should never have existed in the first place.

None of these problems result from weak leadership or poor execution. They result from an operating model that assumes the billet should remain the fundamental unit of work. That assumption served the industry well for many years. It no longer reflects how customers define work or how successful contractors must execute it.

Some organizations will respond by inventing more innovative ways to package and offer FTEs. Those approaches will become increasingly noncompetitive and, as solicitations demand priced outcomes rather than labor, increasingly non-compliant. What contractors need instead is a model that enables the firm to deliver outcomes in short sprints and to melt and repour teams as needed, reforming expertise around each successive outcome the government needs.

4. Demand Must Replace the Billet

Every operating model begins with a fundamental assumption about how work enters the organization. Traditional defense services organizations assume that work belongs to permanent positions. Once a contract begins, each billet effectively owns a portion of the mission, and managers distribute work within the project organization boundaries rather than according to the problem’s characteristics. The project organization, therefore, determines how work flows. That assumption has guided professional services for decades because the government largely purchased organizational capacity rather than discrete outcomes.

The emerging acquisition environment turns that assumption on its head. Programs increasingly begin with an operational need, a mission problem, or a capability gap rather than a staffing requirement. An Area of Interest defines a problem that requires a solution. A Statement of Objectives defines the outcome to be achieved. A Commercial Solutions Opening identifies a capability that does not yet exist. None of these acquisition approaches for defense services begin by asking how many systems engineers, cyber analysts, acquisition specialists, or logisticians the contractor intends to provide. They begin by asking how industry intends to solve the customer’s problem.

That distinction fundamentally changes how contractors should think about work. Instead of asking which organization owns an activity, leaders should first identify the demand signal that created it. Every demand signal carries an objective, a need date, a level of urgency, a required outcome, and a unique combination of expertise needed to achieve success. The organization should therefore build itself around those demand signals rather than forcing each new problem through a predefined organizational structure.

Demand, not the billet, becomes the fundamental unit of management. In this context, demand is a specific signal that a defined mission problem must be solved or a defined mission outcome achieved. That signal may come directly from the customer, or it may emerge when the contractor decomposes a higher-level mission objective into time-bound increments of work. Either way, each demand signal gives the organization a more precise way to understand what work must be done, when it must be done, and what constraints shape execution.

Even when the customer defines the objective at a high level, the contractor must translate it into specific execution sprints. Each sprint carries its own timing, constraints, and required mix of skill and experience. One sprint may require systems engineering judgment, another may require cyber expertise, and another may require acquisition, logistics, data, or cost experience. The dynamic nature of the work, therefore, does not depend solely on the customer changing the objective as new needs emerge. It also comes from the contractor’s responsibility to convert each objective into the sequence of work required to accomplish it. Every body of work assembles the expertise required to accomplish the next objective. Every completed objective returns that expertise to the enterprise, enabling it to support the next demand. The organization continuously reshapes itself around mission needs rather than requiring those needs to conform to the organization.

5. Work Should Assemble Teams, Not the Other Way Around

Most organizations unconsciously assume that teams exist first and work arrives second. Organizational charts reinforce that belief by depicting permanent groups connected by reporting relationships and functional responsibilities. Managers naturally begin every staffing discussion by asking which existing team should perform the work. That approach feels logical because it reflects decades of organizational practice. It also constrains the organization’s ability to respond effectively to changing demand.

Modern engineering organizations increasingly follow a different pattern. They begin with the problem rather than the organization. Leaders identify the outcome they must achieve, determine the expertise required to achieve it, assemble a multidisciplinary team, complete the work, capture what they learned, and then move those people to the next challenge. Software development adopted this model years ago because rapidly changing requirements made static organizations increasingly inefficient. Product development followed because innovation required specialists from multiple disciplines to work together continuously rather than sequentially. Defense services now face the same challenge.

The future organization, therefore, looks less like a traditional organizational unit and more like a continuously adapting network of expertise. Systems engineers, cyber specialists, software developers, acquisition professionals, cost analysts, schedulers, mission planners, logisticians, and data scientists become enterprise resources rather than contract resources. Different combinations of those specialists come together as customer demand requires. Teams form because the work demands them. They do not exist simply because the organization chart says they should.

The bottom line is that future advantage will belong to organizations that can compose their best, precisely matched talent into mission-focused teams at the speed of need, release those teams once their objectives have been met, and form new teams around the next demand.

This operating model does not eliminate organizational structure. Instead, it changes the structure’s purpose. Leadership continues to develop people, establish technical standards, maintain quality, and build organizational culture. Daily execution, however, increasingly occurs through temporary delivery teams assembled around mission objectives rather than permanent functional organizations. Stability remains important, but it supports execution instead of defining it.

6. Delivery Cells Become the New Unit of Execution

Once demand replaces the billet as the organizing principle, another question naturally follows. If permanent organizations no longer own the work, what does?

The answer lies in the delivery cell.

A delivery cell represents a temporary, multidisciplinary team assembled to achieve a specific customer objective. Unlike traditional project teams, the delivery cell does not exist because an organization chart created it. Instead, it forms because a demand signal requires a particular combination of expertise. The cell remains together only long enough to produce the desired outcome. Once the objective has been achieved, the delivery cell dissolves, and its members become available for new assignments across the project or enterprise.

This distinction may appear subtle, yet it fundamentally changes how organizations consume expertise. Traditional programs frequently assign specialists to a single contract, regardless of whether their expertise creates value every day. Delivery cells consume expertise only when the work actually requires it. A cybersecurity architect may be heavily involved in one phase of execution and then move immediately to another program. A cost analyst may contribute during solution development and then transition to another role once pricing decisions are finalized. The organization, therefore, deploys scarce expertise precisely when it creates value rather than continuously because a staffing plan requires it.

The financial implications prove equally significant. Under traditional labor-hour contracts, organizations often accepted periods of underutilization because contract economics absorbed much of the cost. Under outcome-based fixed price contracts, every idle day directly reduces profitability. Delivery cells reduce that structural waste by allowing expertise to move continuously toward the highest-value work. The organization captures greater productivity not because people work harder, but because the enterprise allocates expertise more intelligently.

7. The Enterprise Replaces the Contract as the Center of Gravity

Traditional staffing models naturally encourage local optimization. Every program manager seeks to protect the people assigned to the contract because those individuals represent the program’s primary means of delivering customer value. Managers hesitate to share experts because doing so appears to increase local risk. Each contract, therefore, evolves into a largely self-contained organization that recruits, develops, and protects its own resources.

This behavior creates one of the most persistent constraints in traditional defense services firms. Talent is developed, assigned, and protected within the boundaries of individual projects, even though the company must compete and perform across a much broader portfolio of revenue opportunities. The result appears in familiar ways: unnecessary turnover when people see limited growth paths, reduced profitability when scarce expertise sits idle or remains overcommitted, slower response to customer needs when the right people sit behind the wrong contractual boundary, and lost days of revenue while programs search externally for skills the enterprise already possesses with the available capacity they need. Leaders often recognize these inefficiencies, yet traditional staffing models provide few practical mechanisms to solve them.

Demand-driven organizations reverse that perspective. They make the enterprise—not the individual contract—the level at which talent, expertise, and capacity are managed. Instead of locking capability into static roles, fixed labor categories, and contract-specific staffing plans, they treat expertise as a shared enterprise asset that can move toward the highest-priority demand. Expertise belongs first to the company and only secondarily to individual programs. Customer demand, therefore, determines where specialists contribute instead of historical staffing assignments. Delivery cells make that shift practical because they give the organization a way to compose, release, and recombine talent without treating every assignment as a permanent project commitment. Managers continue to protect mission continuity, but they do so through enterprise visibility rather than organizational isolation.

This shift produces a profound strategic advantage. Every contract gains access to a broader pool of expertise than it could economically sustain on its own; every specialist has opportunities to contribute across multiple programs rather than remain confined to a single assignment; every customer benefits from faster access to scarce capabilities because the enterprise continuously reallocates talent toward emerging priorities. The organization begins to behave like a living system that adapts continuously, rather than a collection of independent programs competing for the same internal resources.

8. Management Must Change Before Technology Matters

Many organizations confronted with these ideas immediately begin searching for software. That reaction, while understandable, reverses the order in which transformation should occur. Technology rarely creates competitive advantage by itself because software automates the business practices that organizations already follow. Companies that automate outdated operating models merely execute outdated practices more efficiently.

Real transformation begins by redefining how leaders think about work. Executives must stop viewing people primarily as labor assigned to contracts and begin viewing expertise as a strategic enterprise asset that continually evolves in response to customer demand. Program managers must stop measuring success solely through staffing stability and begin measuring how effectively they assemble the right capabilities for each mission problem. Functional organizations must recognize that their purpose extends beyond supplying labor. They must develop expertise, preserve technical excellence, and continuously strengthen the enterprise’s ability to respond to changing customer needs.

Leaders should therefore resist the instinct to begin by buying software. The first step is to redefine the operating model itself: how the company will treat expertise as an asset, how demand will trigger work, how teams will form/release, and how decisions about people, projects, pricing, and performance will rely on data rather than informal knowledge or local ownership. SMA did that. We reexamined the assumptions that governed how we managed our people, served our clients, and delivered projects. Then we searched for a digital foundation capable of implementing that new operating model. We discovered that commercial software did not provide one because most systems still reflected the old professional-services paradigm: siloed functions, static roles, contract-centered staffing, and fragmented data. That discovery serves as a caution for any firm contemplating this transition. Do not begin with the tool. Begin with the operating model the company intends to make real.

Once that model is defined, with work triggered by demand, executed by delivery cells, and staffed from an enterprise-wide pool of expertise, a practical question follows: how does the company coordinate all of it? Composing teams, tracking demand, and moving expertise across organizational boundaries at the speed of need requires more information, shared more widely and updated more continuously, than manual processes or disconnected systems can sustain. The operating model transition comes first, but it needs a digital foundation to operate.

9. The Operating Model Demands a Different Digital Foundation

A demand-driven operating model cannot scale through disconnected applications, spreadsheets, or local resource management practices. It requires an integrated digital platform that treats people, projects, customers, and work as interconnected parts of a single management system. The platform must give leaders a common source of truth for expertise, demand, availability, assignments, performance, pricing, and delivery progress. Without that foundation, the enterprise cannot reliably compose delivery cells, move scarce expertise toward the highest-value work, or learn fast enough from one assignment to improve the next.

The model also requires a different unit of information about people. Traditional systems manage employees by position, labor category, certification, and resume. Those data elements matter, but they do not explain how a person creates value in a specific mission context. An integrated platform must capture the roles people have performed, the outcomes they helped produce, the complexity of the work, the impact of the project, the capabilities they demonstrated, and the conditions under which they performed well. That evidence gives managers a practical basis for matching expertise to demand rather than relying on informal knowledge, local ownership, or static staffing plans.

The main idea is simple: the platform must connect customer demand to the people, work, and decisions required to deliver it. When a new requirement arises, the company should be able to define the work, identify the required expertise, assign the right people, authorize the effort, track progress, and capture what was learned. Each step should use and improve the same shared data. That common view allows leaders to see what work the company can perform, who can perform it, and where the enterprise must add capability.

This foundation goes beyond workforce management. It becomes the execution layer for the new operating model. The platform must help the company recognize demand early and prepare to staff it at the speed of need. It must make expertise visible across organizational boundaries, support selection of the right people, authorize the work, track utilization and performance, release people when objectives have been achieved, and preserve what the enterprise learns from each assignment. It must also work with customer relationship management and financial systems without forcing the company back into the old paradigm of disconnected functions and fragmented data. The point is not to digitize the billet. The point is to make the enterprise capable of managing expertise as a strategic asset.

This is the path SMA took. After redefining the operating model, we found that commercial software did not provide the integrated digital foundation required to operate this way. We therefore built the Talent On Demand platform (TOD®) to instantiate the operating model we intended to run: one that connects demand, expertise, assignments, performance, pricing, and delivery through a common data model. Section 10 introduces the platform and explains how it enables the demand-driven model described in this paper.

10. TOD®

SMA began developing TOD® several years before these acquisition trends became widely recognized because we observed a growing disconnect between how the government was beginning to buy services and how contractors continued to organize themselves to deliver them. Acquisition organizations increasingly emphasized mission outcomes, rapid adaptation, and capability increments while workforce systems remained focused on labor categories, contract assignments, and static staffing plans. That disconnect suggested that the industry required more than incremental improvements to recruiting or workforce management. It required an entirely different execution model.

TOD® supports that model by treating expertise as a strategic enterprise asset rather than a collection of contract or project-specific resources. Customer demand enters the organization as a mission requirement rather than a staffing request. The platform identifies the combination of expertise required to satisfy that demand, assembles a delivery cell from across the enterprise, authorizes the work, monitors execution, and releases specialists when the objective has been achieved. Every completed effort immediately returns valuable expertise to the enterprise, making it available for the next mission rather than tying it to a completed task.

This approach produces benefits that extend well beyond staffing efficiency. Program managers gain faster access to scarce expertise because specialists no longer remain isolated within individual contracts. Customers receive multidisciplinary teams assembled specifically for their mission rather than the people who happen to occupy predefined positions. Executives gain enterprise-wide visibility into capacity, enabling them to balance work across the business rather than solving staffing problems one contract at a time. The result improves responsiveness, strengthens utilization of high-value expertise, and reduces structural costs that traditional staffing models quietly absorb. It dramatically enhances the quality of delivery and improves profitability.

TOD® represents much more than another workforce management system. It provides the digital execution platform required to support a demand-driven operating model. The platform does not replace leadership, technical judgment, or program management. Instead, it enables leaders to execute an operating philosophy that traditional workforce systems were never designed to support.

11. The Opportunity Extends Beyond Fixed-Price Contracts

Firm-Fixed-Price contracting for government services has accelerated interest in new operating models by exposing inefficiencies that previous contract structures often concealed. Contractors immediately recognize the financial consequences when idle capacity, unnecessary handoffs, or poorly aligned staffing consume margin that cannot be recovered. Those pressures understandably focus attention on pricing and execution.

The underlying transformation, however, extends well beyond fixed-price contracts. The Department of War increasingly purchases capability through shorter cycles, smaller increments, and clearly defined mission objectives, regardless of contract type. Areas of Interest divide complex programs into manageable problems. Statements of Objectives define desired outcomes rather than prescribed activities. Rapid capability organizations prioritize operational effects instead of detailed staffing plans. Even traditional acquisition programs increasingly emphasize continuous delivery, experimentation, and adaptation rather than comprehensive solutions developed over many years.

These acquisition strategies reward organizations that can rapidly assemble expertise in response to evolving customer needs. They favor companies that can reconfigure themselves as the mission changes rather than organizations that rely upon fixed structures established at contract award. Contractors who continue to optimize around permanent billets will therefore encounter increasing friction, regardless of whether the contract ultimately uses Cost-Plus, Time-and-Materials, or Firm-Fixed-Price pricing. The operating model itself increasingly determines competitive advantage.

12. The Next Competitive Advantage

Every major shift in defense acquisition eventually reshapes the companies that support it. Performance-based logistics transformed sustainment by rewarding outcomes instead of transactions. Model-Based Systems Engineering transformed engineering by shifting the focus from documents to digital models. DevSecOps redefined software development by replacing sequential delivery with continuous integration and deployment. Each transition required organizations to rethink not only the tools they used, but also the assumptions that governed how work should proceed.

Defense services now stand at a similar inflection point. The familiar constructs of labor categories, long-term billets, and contract-specific staffing evolved to match the acquisition environment of their time. That environment has changed. The government increasingly purchases solutions to operational problems rather than organizational capacity. Industry must therefore organize around the same unit of value that customers now buy.

The billet is no longer the right building block for competitive advantage. Customer demand is. When a new mission need appears, the organization must quickly assemble the right expertise. It must form a delivery cell, complete the objective, and return that expertise to the enterprise for the next priority. Companies that can repeat that cycle at the speed of need will respond faster, reduce wasted capacity, and perform better financially because their operating model matches how defense customers increasingly buy capability.

The next generation of defense services will not distinguish itself solely by recruiting better people, although exceptional people will always matter. Neither will it distinguish itself solely through lower prices, improved proposal quality, or more sophisticated contracting strategies. The enduring advantage will belong to organizations that redesign how expertise flows through the enterprise and, in doing so, redesign how work gets done so they can respond faster to customer needs and ensure project outcomes are met. Those organizations will compete less on the size of their workforce than on the intelligence with which they deploy it. They will not simply adapt to the future of defense acquisition. They will help define it.

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