The Ministry of Defence Grand Challenge aims to accelerate development of new technology that will support UK soldiers fighting in urban areas.
Competing teams must build a "semi-autonomous system that can detect, identify, monitor and report a range of physical threats in an urban environment."
The Challenge will take place at Copehill Down in Wiltshire, an army training centre, built in the Cold War and modelled on an East German village.
Teams will have to automatically identify a range of threats including improvised explosive devices (IEDs), snipers and vehicles equipped with light arms.
A range of designs has been proposed for the competition including a swarm of tiny helicopters and a miniature unmanned vehicle adapted from the oil industry.
Competitors have been given the opportunity to survey the area. Some teams took GPS readings, coupled with infrared and video images of the training centre.
Many teams identified several hazards that could cause problems for aerial vehicles. Of particular concern are trees, overhead wires and the strong winds between buildings.
The competition will take place in August 2008. The winners will receive a trophy and funding from the Ministry of Defence to refine their design.