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A water supply network optimization model called MODSIM3 is presented as a decision-support tool for aiding city staff in determining how best to utilize and exchange existing and potential water supplies with other users in a river basin. The model is applied to the City of Fort Collins, Colorado, water supply system as a means of determining optimum ways the City can utilize direct flow rights, storage rights, and exchangeable waters from various sources. Results clearly confirm both the benefits of the use of exchanges and the value of MODSIM3 as a water supply planning and management tool. Published in Journal of the American Water Resources Association, volume 22, issue 6, on pages 927 - 940, in 1986.