Past phases of the NODP focused primarily on technology demonstrations. Phase III focuses on developing a state's ability to promote proven onsite treatment methods and management approaches, including technology, training, technical assistance, decentralized management systems, and financing of onsite systems. This demonstration promotes changes in states' management approaches, resulting in wider acceptance of onsite systems as permanent wastewater solutions. Phase III offers community assistance via construction, reconstruction, repair or upgrade of wastewater treatment technologies and/or systems.

The states selected for Phase III demonstration projects are: West Virginia, Oregon, New York, Alaska, and Vermont. The general criteria used to select the states were high occurrence of flooding since 1996, difficult terrain and/or soils, and a rural nature.