(a) First 2 years. Before the beginning of the first program year of the grant, each grantee must reach agreement with the Department on levels of performance for each measure listed in § 641.700 for each of the first 2 program years covered by the grant agreement. In reaching the agreement, the grantee and the Department must take into account the expected levels of performance proposed by the grantee and the factors described in paragraph (c) of this section.

The levels agreed to will be considered the expected levels of performance for the grantee for such program years. Funds may not be awarded under the grant until such agreement is reached. At the conclusion of negotiations concerning the performance levels with all grantees, the Department will make available for public review the final negotiated expected levels of performance for each grantee, including any comments submitted by the grantee regarding the grantee's satisfaction with the negotiated levels.

(b) Third and fourth year. Each grantee must reach agreement with the Department prior to the third program year covered by the grant agreement, on levels of performance for each measure listed in § 641.700, for each of the third and fourth program years so covered. In reaching the agreement, the grantee and the Department must take into account the expected levels of performance proposed by the grantee and the factors described in paragraph (c) of this section. The levels agreed to will be considered to be the expected levels of performance for the grantee for such program years. Funds may not be awarded under the grant until such agreement is reached. At the conclusion of negotiations concerning the performance levels with all grantees, the Department will make available for public review the final negotiated expected levels of performance for each grantee, including any comments submitted by the grantee regarding the grantee's satisfaction with the negotiated levels.

(c) Factors. In reaching the agreements described in paragraphs (a) and (b) of this section, each grantee and the Department must:

(1) Take into account how the levels involved compare with the expected levels of performance established for other grantees;

(2) Ensure that the levels involved are adjusted, using an objective statistical model based on the model established by the Secretary of Labor with the Secretary of Education in accordance with sec. 116(b)(3)(A)(viii) of the Workforce Innovation and Opportunity Act (29 U.S.C. 3141(b)(3)(A)(viii)); and

(3) Take into account the extent to which the levels involved promote continuous improvement in performance accountability on the core measures and ensure optimal return on the investment of Federal funds.

(d) Adjustments based on economic conditions and individuals served during the program year. The Department will, in accordance with the objective statistical model developed pursuant to paragraph (c)(2) of this section, adjust the expected levels of performance for a program year for grantees to reflect the actual economic conditions and characteristics of participants in the corresponding projects during such program year.