Cream the butter and margarine. Gradually add 1/4 cup plus 2 tbsp sugar, beating well at medium speed of an electric mixer.
Add the water and vanilla, beating well. Gradually add the flour to the creamed mixture, beating well. Stir in ground pecans.
Shape dough into 1-inch balls; place 2 inches apart on a greased cookie sheet. Flatten the balls to 1/4 inch thickness with the palm of your hand. Bake at 350 degrees for 10 to 12 minutes. Let cool slightly on the cookie sheet.
Roll cookies in additional sugar to coat. Let cool completely on wire racks.