The DRS holds Head Start agencies accountable for delivering high-quality and comprehensive services to the children and families they serve, and meeting program and financial requirements. The DRS establishes seven conditions to determine whether the agencies qualify for continued Head Start funding for five years without competing for those funds with other local agencies. The DRS helps the Office of Head Start (OHS) ensure the most qualified entity is providing services to Head Start children and families in each local service area.

This rule increases federal support for grantees to continuously improve the quality of the interactions between Head Start children and their teachers. The changes also reduce uncertainty around the competitive process for local Head Start agencies in communities across America. The revised DRS identifies the Head Start grantees for which competition is the most warranted, redefining the conditions for competitive designation to target grantees with lower performance or systemic problems. This ensures a more efficient use of both federal and local resources required for the competitive process.

This regulation builds on the lessons OHS has learned since the DRS was initiated in 2011. It incorporates learning from the independent evaluation of early DRS implementation and from OHS's own data analysis to make improvements to the system. In addition, it sets clear expectations of classroom quality that all grantees should be working toward, particularly in the area of interactions between Head Start children and their teachers. The regulation requires support from OHS for grantees that do not meet certain quality thresholds to improve teaching practices and teacher-child interactions.

Research suggests higher levels of instructional quality are linked to improvements in child outcomes. The new quality thresholds around teacher-child interactions and higher minimum thresholds for competition will improve the Head Start experience for many children.

In addition, all Head Start communities will benefit from the system's ability to better focus competition on those communities where grantees show lower performance or there are systemic problems in operations.

This rule will safeguard federal funds by identifying grantees with potentially serious financial problems in their Head Start grant before the financial problems might impact their viability. It will also result in a more efficient use of federal and local program resources required for the competitive process, as competition will be better targeted to grantees with lower performance or systemic problems.

The improved DRS will benefit tribal programs similarly to non tribal programs. This rule does not change the existing DRS requirements of government-to-government consultation with the appropriate tribal government (Tribal Government Consultation) to establish and implement a plan to improve quality for any tribal grantees that meet a DRS condition.

This rule appropriately sets Head Start agency focus on improving the quality of teacher-child interactions and on promoting rich, engaging, and sensitive interactions between teachers and children in all classrooms. In addition, children and families will benefit as programs devote less energy to avoiding a single deficiency and increase their focus on improving systems. The regulation will also identify fiscal challenges within the Head Start agency before they result in operational challenges that reduce program quality and stability of services to children and families.

The final rule includes changes to three of the seven DRS conditions – the deficiency condition, the condition related to the Classroom Assessment Scoring System (CLASS®), and the fiscal condition related to audit findings.

• DRS no longer requires competition for grantees with a single deficiency during their project period. While all deficiencies are serious and substantial or systemic, changing the condition to require competition after two deficiencies during the project period will better reflect significant quality failures of an agency.
• The final rule establishes quality thresholds and raises the competitive thresholds (formerly minimum thresholds) for each domain of the CLASS®. Any grantee with a score below a competitive threshold will be designated for competition. Any grantee with a score below a quality threshold will be designated for quality improvement. OHS will provide support for quality improvement. The final rule also removes the lowest 10% criterion of the CLASS^® condition.
• Finally, a second fiscal criterion is added, in which any grantee that has a total of two or more audit findings of material weakness or questioned costs related to their Head Start funds in audits for a financial period within the current project period will also be required to compete. DRS retains the requirement to compete for a going concern in an audit report and adjust the time window in which it is considered.

The CLASS^® quality thresholds represent expectations for all grantees of the teaching and learning environment in Head Start classrooms. The quality thresholds are designed to support CLASS^® as a quality improvement tool as used in the DRS. Grantees that score below one or more of the quality thresholds will not be designated for competition. Rather, OHS will provide support for these grantees as they make improvements in classroom quality. However, grantees that fall below one or more of the CLASS^® competitive thresholds will be designated for competition.

The prior DRS conditions will apply to all programs until the effective date of this final rule. The revised conditions will be effective Nov. 9, 2020. Grantees whose performance prior to the effective date of the rule met one or more conditions requiring them to compete will be reassessed to determine if they still meet the new conditions. Grantees whose performance would have required competition under the prior conditions will only be required to compete after the effective date of this rule if they would also be required to compete under the new conditions.

No, the preliminary noncompetitive decisions will not be revisited in general under the revised DRS conditions, and these grantees will continue to be eligible for a noncompetitive new grant. However, as is always true, if a grantee receives two or more deficiencies, a license revocation, suspension, debarment from any federal or state funds, disqualification from the Child and Adult Care Food Program, or an audit finding of a going concern after the grantee has been determined preliminarily eligible for a noncompetitive award but before receiving their noncompetitive five-year grant award, they would be required to compete. The same would have been true under the prior DRS regulation, with the only difference being an increase in the number of deficiencies requiring competition.

If a notice of funding opportunity (NOFO) for the grantee's service area has not yet been posted, only those grantees required to compete under both the previous conditions and the revised conditions will be required to compete. OHS will reassess to determine if a grantee will still have to compete based on the revised conditions in this final rule. Grantees that met a previous DRS condition but do not also meet the conditions set forth in this final rule may no longer be required to compete. OHS will send redetermination letters to all grantees who already received a preliminary decision that they were required to compete for renewed funding, either reconfirming their competitive status or notifying them of preliminary eligibility for noncompetitive funding.

Since the DRS was first established in 2011, OHS has used the date the monitoring report with a deficiency is issued to the grantee as the date the grantee “has” a deficiency. OHS now issues monitoring reports in the Head Start Enterprise System (HSES), so when OHS sends a monitoring report with a deficiency to a grantee in HSES, that is the date the grantee “has” a deficiency.