The problem of the placement of pumps and the selection of pumping rates are the most important issues in designing contaminated groundwater remediation systems using a pump-and-treat strategy. Three nonlinear optimization formulations are proposed to address these problems. The first problem formulation considers hydraulic constraints and reduces the plume concentration to a specified regulation standard value within a given planning time while minimizing capital cost. The second formulation minimizes residual contaminant in a fixed period under hydraulic contraints only. The third formulation is similar to the second formulation; however, in this formulation the number of pumps is prespecified by using the results from the first formulation. The inclusion of well installation costs in the first problem formulation results in a nonsmooth objective function. For such problems, only local optimum solutions can be expected by the use of conventional nonlinear optimization techniques. In the present paper, the simulated annealing algorithm is used to overcome these difficulties. Specific simulation studies indicate that the method advanced herein is promising and involves acceptable computation times.