This Report describes a performance contracting program in Norfolk, Virginia; presents its results; and draws some inferences about the utility of performance contracting as a means for improving education. Participants were students from grades 7-9 in one junior high school and from grades 4-6 in one elementary school; both schools were in the inner city and had an almost entirely black student population. Learning Research Associates (LRA) provided the training and materials for conducting an individualized program of instruction in reading to the program teachers. Individualization consisted primarily of determining each student's strengths and weaknesses in reading by means of a diagnostic test, and assigning the materials that would remedy the weaknesses uncovered. Despite the improvement in classroom atmosphere, the results of the final testing showed that students at the junior high level gained in reading achievement only about as much as they had been gaining in the past and that students at the elementary level were, in many instances, scoring lower on post-tests than on pre-tests. Interim tests of performance on assigned objectives demonstrated that the students had actually reached the program objectives, but there is no way to prove that the program was responsible for these results. The Norfolk program demonstrated that performance contracting does not automatically solve the deeply rooted problems of compensatory education. For related documents, see ED 056 247, 248, 249, 250, 251, and 252. (Author/CK)