The Small Business Administration has named a local engineering firm that does classified work for the Pentagon as its 1985 "Prime Contractor of the Year."

Engineering Research Associates of Vienna was picked after a nationwide competition among 82 small businesses that do work for the federal government.

The criteria that led to the company's selection included management, financial control, cost, delivery and quality of performance, according to an SBA official.

Paul F. Arnone, ERA's founder and chief executive officer, attributed the award to the joint ownership of the company by its 170 employes, each of whom has gained equity in the company either when he or she joined the firm or through performance on the job. "There's an incentive for everyone to pitch in. They know as individuals they can make a difference," he said.

The company develops advanced computer-based systems for military and commercial applications, although 90 percent of its work is carried out for the Defense Department, said Arnone, who formerly worked for Sperry Corp.

A major part of the company's business is building electronic surveillance systems for the military, as well as systems intended to thwart enemy intelligence.

Founded in 1977, the company has experienced a compound growth rate of about 30 percent a year since 1978. Revenue in 1984 exceeded $12 million.