Enlisting: North Carolina's small businesses are dreaming up and developing technologies for the military.

• Position: SPONSORED SECTION: MILITARY BUSINESS

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Raleigh-based Vadum Inc. builds technology for electronic warfare. "All of our work is very advanced technology, one step out of academia," says CEO Gary Edge. In January, his company was selected by the Pentagon's U.S. Defense Advanced Research Projects Agency to develop countermeasures for enemy radar systems. It's not the only victory for the company that started in 2004 and employs 20 people. "Last year, we submitted 13 proposals, and six were accepted for contract awards. We won two Navy programs this year already that deal with submarines. One is an electronic surveillance system for a torpedo that would deploy, float to the surface and 'listen for various signals."

Technology is one of the most powerful weapons in the U.S. military's arsenal, and the Pentagon is recruiting small businesses, such as Vadum, and universities to develop it. Companies in North Carolina were awarded $2.7 billion worth of defense contracts in 2015, according to the North Carolina Military Business Center. "Businesses in North Carolina are well-positioned to perform this R&D work, which will expand businesses, grow jobs and expand the economy of our state," says Denny Lewis, the center's federal business adviser.

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Department of Defense needs are rooted in 17 industries. Most are in North Carolina's wheelhouse, including information technology, advanced materials, biotechnology and life sciences, textiles and biomanufacturing. Gaining that work begins when DoD solicits proposals for Small Business Innovation Research and Small Business Technology Transfer projects each year. Selected companies first receive about $150,000 and six months to develop a product. Then they can apply for Phase II money, often about $1 million, and begin production. If they are accepted for Phase III, a large manufacturer takes over production. "We usually fund two or more of these companies at the same time," says Bradley Guay, a program manager at the Army Research Office in Research Triangle Park. "In Phase III, they can get money from companies such as [Chicago, Ill.-based] The Boeing Co."

There were 29 SBIR awards in various phases, worth about $7 million, in North Carolina in 2012. The small businesses that won them have fewer than 500 employees, are independently owned in the U.S., and are capable of completing Phase I and at least half of Phase II research. Businesses must meet similar requirements for tech transfer projects. They...