Extract: The report addresses recent revisions to the federal "Principles and Standards" for planning municipal and industrial water development. Revisions include a requirement that nonstructural and water conservation measures be incorporated into project cost-benefit analyses. A specific cost-benefit methodology accommodating the revisions is constructed and discussed. Informational requirements for applying this methodology are identified. Water supply and demand functions are required for the empirical application of this technique. Estimations of these functions for a particular project enables the project to be evaluated. In addition to being consistent with federal mandates, this technique offers important advantages over the traditional "requirements" approach to project evaluation.