We derived the cost index value and cost formula of watersupply and water purification in small towns in Chongqing, P. R. China, based on the economic index of domestic watersupply plants, the cost model of domestic and overseas economic indices, and local labor and materials prices. Investment estimation indices for water supply plants in western small towns subsequently were obtained according to the equipment transportation rate and adjustment coefficients in other areas of western China. We analyzed the cost of producing water in watersupply plants in small western towns based on the cost structure analysis and the cost model of investment index, and subsequently derived the unit cost for producing water.