Starting Early Starting Smart (SESS) is a knowledge development initiative designed to: (1) create and test a new model for providing mental health and substance abuse prevention and treatment for young children (birth to 7 years) and their families; and (2) inform practitioners and policymakers of successful interventions and promising practices from a multi-year study. In the third year of the first 5-year phase, 12 culturally diverse grantee organizations provide integrated behavioral health services in community-based early childhood settings where families customarily receive services for children. This report identifies the conceptual and methodological issues associated with the analysis of costs and outcomes of early intervention programs in general and makes recommendations regarding the application of these tools for subsequent demonstration studies of SESS. Chapter 1 discusses the results-based accountability movement in social services and argues that knowledge about the relationship between costs and outcomes is useful for program directors but is also important for developing policy approaches at a more general level. Chapter 2 provides a primer on various types of cost and outcome analysis: cost-benefit, cost-effectiveness, and related methods within the broader decision support framework or policy scorecard analysis. Chapter 3 discusses issues in cost and outcome analysis specific to early childhood intervention programs, focusing on measures for benefits and estimation of costs. Chapter 4 reviews the literature on cost and outcome analysis for early childhood intervention programs and provides illustrations of such analyses from the Perry Preschool Program, the Elmira Prenatal/Early Infancy Project, and the Chicago Child Parent Centers. Chapter 5 applies the concepts to the SESS program, with specific recommendations regarding the evaluation design and implementation of cost and outcome analysis. Chapter 6 summarizes the main findings and presents conclusions. Three appendices include descriptions of the grantees and mission statements of the national collaborators involved in the project. Also appended is the Executive Summary. (Contains 1 figure, 15 tables, and a 77-item bibliography.) (KB)