Head Start is a federal program that has provided comprehensive early childhood development services (e.g., education, health, nutrition, and social services) to low-income children and their families since 1965. These services are intended to promote the school readiness of children by enhancing their cognitive, social, and emotional development. Most children served in Head Start programs are three- and four-year-olds, but in the mid-1990s Head Start was expanded to include Early Head Start programs targeted to infants, toddlers, and expectant parents. In this report, the term Head Start is inclusive of the Early Head Start program, unless otherwise specified. At the federal level, the Head Start program is administered by the Office of Head Start (OHS) within the Administration for Children and Families (ACF) at the U.S. Department of Health and Human Services (HHS). HHS provides federal Head Start funds directly to local public and private non-profit and for-profit agencies (called "grantees"), rather than through states. Head Start programs are locally designed and are administered by roughly 1,600 grantees. Since the program's inception, Head Start grantees have generally been given grant awards for indefinite periods (i.e., awards with no end date). However, the 2007 Head Start reauthorization law ( P.L. 110-134 ) changed this by instituting a five-year designation period for Head Start grantees. Under the new law, at the end of its five-year designation period, a grantee must demonstrate that it is delivering high-quality and comprehensive services, or else the grant is to be opened for re-competition. The law refers to the process of identifying grantees for re-competition as the Designation Renewal System (DRS). HHS was tasked with establishing the DRS, based on certain parameters specified within the law. This report provides an overview of the major milestones leading up to the early implementation of the DRS. Table 1 outlines a chronology of these milestones and serves as a preview to the remainder of the report, which discusses these events and activities in greater detail. The bulk of the report is focused on the DRS itself, including the indicators used to identify grantees for re-competition and the status of competitions to date. The report concludes with a discussion of additional issues related to the DRS, including legal challenges and evaluation plans. In the years leading up to the 2007 reauthorization law, Congress demonstrated a growing interest in introducing more competition to the Head Start program. A Government Accountability Office (GAO) report published in February 2005 recommended that HHS begin re-competing grants in cases where a grantee had failed to meet program, financial management, or other requirements. In response, HHS expressed concerns over the legal authority for entering into such competitions and GAO suggested that Congress may wish to "clarify" these authorities. Subsequently, the idea of limiting grantee designation periods to five years and requiring "low performing" grantees to re-compete was raised at congressional hearings and in various draft reauthorization bills throughout the 109 th and 110 th Congresses. However, it was not until December 2007 that Congress ultimately enacted legislation requiring HHS to carry out these activities. The Improving Head Start for School Readiness Act of 2007 ( P.L. 110-134 ) reauthorized Head Start through the end of FY2012. This law significantly amended the existing Head Start Act. A seminal component of the reauthorization law was the requirement that HHS develop a "Designation Renewal System" to identify low performing grantees for re-competition. Under the law, the stated purpose of the DRS is to "determine if a Head Start agency is delivering a high quality and comprehensive Head Start program that meets the educational, health, nutritional, and social needs of the children and families it serves, and meets program and financial management requirements and standards." Section 641(c) of the amended Head Start Act tasked the Secretary of HHS (the Secretary) with developing the DRS, in consultation with a panel of experts, and specified that the DRS must base determinations of program quality on annual budget and fiscal management data; program monitoring reviews (which must occur at least once every three years according to requirements set forth in Section 641A(c) of the Head Start Act); annual audits (as required by Section 647 of the Head Start Act); classroom quality (as measured under Section 641A(2)(F) of the Head Start Act, which calls for the use of a "valid and reliable research-based observational instrument, implemented by qualified individuals with demonstrated reliability, that assesses classroom quality, including assessing multiple dimensions of teacher-child interactions that are linked to positive child development and later achievement"); and Program Information Reports (annual reports submitted by all Head Start grantees and delegate grantees, which provide comprehensive data on staff and services, as well as children and families served). The conference report ( H.Rept. 110-439 ) accompanying the 2007 reauthorization law stated that the DRS was not expected to require the majority of Head Start programs to re-compete: "The Conferees strongly believe the majority of Head Start programs are delivering high quality services, and therefore do not intend for this new designation system to result in competition for designation for the majority of Head Start programs." The conference report went on to express the belief that having low-performing grantees compete for funding would improve overall program performance. The 2007 reauthorization law called for the Secretary of HHS to convene an expert panel to make recommendations on the development of a "transparent, reliable, and valid" system for designation renewal. To this end, the Secretary chartered an advisory committee in January 2008. Twelve months later, in December 2008, the advisory committee released a report with formal recommendations for implementing the DRS. The advisory committee recommended that the DRS include a combination of automatic indicators and key quality indicators. Under the committee's proposal, the automatic indicators would be used for problems of "such a serious nature that a single occurrence would automatically require a grantee to compete for renewal." The committee suggested that this include cases in which a grantee had declared bankruptcy, been debarred from receiving federal funds, had a license revoked, or had a "high number" of deficiencies identified in a program monitoring review (where "high number" was defined as two standard deviations from the mean). Meanwhile, key quality indicators would require competition "when a pattern of poor performance on multiple indicators is present." The advisory committee recommended the development of key quality indicators in four broad areas (program management, education, comprehensive services, and financial management) and called for the Secretary to establish a threshold for each indicator such that a meaningful distinction would be made between programs providing high-quality services and those not providing high-quality services. In September 2010, HHS released a Notice of Proposed Rulemaking (NPRM) on designation renewal and re-competition based, in part, on the advisory committee's recommendations. The NPRM proposed re-competing at least 25% of all Head Start and Early Head Start grantees participating in monitoring reviews in a given year. (Monitoring reviews are largely triennial, so roughly one-third of all grantees participate in monitoring reviews each year.) Under the proposal, grantees would be identified for re-competition based on performance on seven proposed indicators addressing varied aspects of program quality, licensing and operations, and fiscal and internal controls. (The seven indicators proposed in the NPRM serve as the basis for the seven indicators included in the final rule, with some adjustments. For a more robust discussion of these indicators, see the " DRS Final Rule " section of this report.) The NPRM proposed requiring automatic re-competition for any grantee that failed to meet standards set by one or more of the seven indicators. In the event fewer than 25% of grantees were to trigger re-competition in a given year, the NPRM proposed using "objective criteria" to identify additional low performing grantees for re-competition. The NPRM did not identify these objective criteria, but solicited feedback from stakeholders on what they should be. Ultimately, the final rule eliminated the 25% requirement altogether (see related discussion in the section on " Differences from the NPRM "). The NPRM gave the public 90 days to comment on the proposed rule (i.e., until December 21, 2010). During that time, HHS received approximately 16,000 comments on the NPRM from Head Start grantees, parents, teachers, state associations, national organizations, academic institutions, and legal entities. HHS took these comments into consideration before publishing a final rule on the DRS in November 2011. HHS published the DRS final rule on November 9, 2011. Under the terms of the final rule, the DRS became effective on December 9, 2011, thirty days after the rule was published in the Federal Register . This section of the report explores the contents of the final rule, with emphasis on the indicators selected for identifying grantees for re-competition. The final rule established seven indicators for identifying programs that are not providing "high-quality and comprehensive services." Any Head Start grantee that fails to meet the minimum quality standards established by one or more of the seven indicators listed below (and described in greater detail in Table 3 at the end of this report) is automatically required to compete for continued funding. This does not mean the grantee will automatically lose its funding. Rather, it means the grantee will have to successfully compete against other interested applicants to continue to receive funding. DRS Triggers for Re-competition: 1. The grantee has had one or more deficiencies identified in a single monitoring review. 2. The grantee has failed to establish and use goals for improving school-readiness (including analysis of aggregate and individual child-level assessment data). 3.