This report is an indepth study of the competency movement. It probes current methods of constructing, administering, evaluating, and explaining competency tests; it gives detailed accounts of specific state and local programs; it presents case histories that can enable the administrator and educator to benefit from the experience of others; and it shows samples of actual competency tests currently in use. Beginning with "What Is Competency Based Education?" the book goes on to examine legal problems that have arisen out of competency testing, such as cultural bias and insufficient preparation. It then examines implications and trends for the future. The report attempts to offer concrete ideas and information that can help schools implementing competency-based education programs avoid the pitfalls and develop a broad, up-to-the-minute response to the competency challenge. An appendix contains National Assessment of Educational Progress sample questions, a table summarizing state activity in minimal competency testing, and selected relevant resources. (Author/JM) Aspect of National Assessment (NAEP) dealt with in this document: Assessment Instruments (Released Exercises).