NATO signed a $1.7 billion contract with U.S.-based defense contractor Northrop Grumman (NYSE: xxx) for five unmanned aerial vehicles, commonly known as drones, that will be used by allied countries for a new ground-surveillance system.

This Alliance Ground Surveillance program has been a major acquisition priority for NATO. This is an historic moment, and we are honored to be bringing this vital, leading-edge capability to all NATO member nations, said Otfried Wohlleben, NATO's AGS program manager in a statement.

The deal was finalized on May 20, the first day of the NATO summit in Chicago, and involved the U.S. and 12 other allied nations -- Bulgaria, Czech Republic, Estonia, Germany, Italy, Latvia, Lithuania, Luxembourg, Norway, Romania, Slovakia and Slovenia.

The five Block 40 Global Hawk drones will be employed for NATO's new AGS system, which will provide the organization's 28 member states with intelligence gathered by the aircraft.

Using advanced radar sensors, these systems will continuously detect and track moving objects throughout observed areas and will provide radar imagery of areas of interest and stationary objects, NATO wrote on its Web site.

The real-time long-endurance intelligence, surveillance and reconnaissance that this will provide will be invaluable to NATO forces around the world and the success of their missions, Wohlleben said.

The AGS system will first be made available to the 13 nations involved in the contract, and will later be made available to all NATO member states over a two-year timeframe from 2015 to 2017, after which all Alliance members will maintain the system.

The system's main operation base will be located at the Sigonella Air Base in Sicily, in the south of Italy.

AGS will be able to observe what is happening on the earth's surface, providing situational awareness before, during and, if needed, after NATO operations, NATO said.