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Competency-based education stems from performance-based assessment and was originally known in the United States as performance-based education. There are several definitions of competency-based education, most likely because this methodology has been applied to a diverse group of educational designs such as teacher preparation and vocational programs. Competence can be characterized as one's having the ability, knowledge, and skills to successfully perform a set task or job with the task and the criteria for success clearly defined. Directly related to competence is performance-based learning, which ensures that a competency or set of competencies is documented as being achieved by the learner.

It is widely accepted that competency-based education originated from ideals within teacher preparation and education. Later, competency-based education was incorporated into elementary, high school, and vocational training. The movement known as competency-based education and training began around 40 years ago, although similar programs were developed as early as the 1920s within the United States. One example of this learning system's earliest beginning incorporates educational reform with business and having behavioral objectives that are based upon outcomes. The 1960s witnessed an impetus for change as greater answerability in education was deemed necessary. One result was an increased level of community involvement, especially in the area of decision making related to curricular development.

Thus, the conceptual and theoretical background in teacher education saw rapid change in the 1960s as did other areas within the educational sector. Curriculum reform for training teachers was a contentious issue at this time because a huge investment was being made in curriculum development for training future teachers. In 1968, the U.S. Office of Education gave 10 grants to colleges and universities to develop model training programs for elementary school teachers. Teacher competence and student achievement were emphasized, thus instituting reform for teacher education. The American Association of Colleges for Teacher Education outlined competency-based ideals that created a new foundation for teacher education.

By the early 1970s, competency-based educational practices were often the norm, guided by the principles laid out by administrators and state certification agencies. These standards were easily instituted, as a teacher oversupply ensured that only the most competent teachers received teaching positions. With the advent of competence-based education as the exclusive methodology for teacher training and certification, a backlash occurred. Some professionals within higher education felt threatened by a lack of autonomy and felt infringements upon their academic freedoms whereas others had more concern with the rapid pace with which competency-based education had been implemented.

Despite its full inclusion as teacher preparation, the competency-based method was largely unproven. There was no evidence to support this learner-centered methodology as being any better than previous methods for teacher preparation. Positive, causal linkages between teacher behavior and student performance had not been identified. Although it seemed like a rational approach, the lack of supporting evidence was a serious shortcoming.

Protests emerged, as did lawsuits. The state of Texas, for example, found competency-based education unconstitutional on the grounds that one method of instruction should not be mandated. Other states worked with institutions of higher education to develop suitable competency-based programs that passed the inspection of administrators, politicians, and teachers themselves. The encouragement to work within the limitation of the competency-based method was brought about by federal and state funding for research as well as program development.

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