Alternative Methodology

The law allows for the use of an alternative methodology developed by the state (such as a cost estimation model) instead of the market rate survey described in the previous section. While a market rate survey measures prices charged by child care providers, a cost estimation model documents the full cost to providers of delivering quality child care, or of delivering care at various levels of quality, such as the levels of a quality rating and improvement system (QRIS). Many child care providers report that they are unable to set published prices that reflect the full cost of providing quality services because parents would be unable to pay these prices. As a result, the published prices reflected in market rate surveys are not always adequate to cover providers' full costs, particularly for high-quality care.

Cost estimation models should account for key factors that affect the cost of service delivery, such as

The Provider Cost of Quality Calculator

Lead Agencies may use the Provider Cost of Quality Calculator (PCQC) or similar tool to estimate the cost of care. The PCQC is an easy-to-use web-based tool that calculates the cost of quality—based on site-level provider data—to help state policymakers understand the costs associated with delivering high-quality child care services. States can use the PCQC to take into account the cost of quality and inform an alternative methodology for setting payment rates. The tool can demonstrate whether there is a gap between the cost of providing quality services and the revenue sources available to support a program. Knowing the size of the gap at different quality levels for various types of providers can inform the design of financial support and incentive packages. The PCQC is free to use and publicly available on the Early Childhood Training and Technical Assistance System website.[1]

  • staff salaries and benefits,
  • training and professional development,
  • curricula and supplies,
  • group size of children and staff-child ratios,
  • enrollment levels,
  • program size,
  • facility costs (rent or mortgage and utilities), and
  • other factors.

Such models should also take into account that costs vary across submarkets, such as by

  • provider category (for example, center or family home),
  • geographic groupings (for example, by locality or urban versus rural),
  • age of child (for example, infants and toddlers, preschoolers, and school-age children), and
  • other considerations (for example, care for children with disabilities or special health needs).

Lead Agencies should be aware of a few key points about the use of an alternative methodology to set payment rates:

  • Any alternate methodology used in lieu of a market rate survey must be approved in advance by the Administration for Children and Families as part of the CCDF Plan development and review process.
  • Advance approval is not required if the state plans to implement both a market rate survey and an alternative methodology.


[1] Office of Child Care, Administration for Children and Families, U.S. Department of Health and Human Services. (n.d.). Provider cost of quality calculator. Retrieved from