This interim report describes the development of program implementation and cost studies for Year II of the process evaluation of Project Developmental Continuity (PDC), a Head Start demonstration program aimed at providing educational and developmental continuity between children's Head Start and primary school experiences. Specific areas focused on in the report are: (1) assessment of the program implementation at each site; (2) analysis of the factors affecting implementation and identification of hypotheses relating levels of implementation with local or social characteristics; and (3) assessment of program costs. Chapter I presents an overview of the PDC evaluation and the purpose of Interim Report IV. Chapter II outlines the overall design of the Implementation Study and includes a summary of data collection activities for the year 1976. Chapter III contains a description of the development of implementation assessment instruments. Results of a field test of data collection and analysis instruments conducted in Spring '76 are discussed and revisions are suggested. Chapter IV reports progress in identifying local factors, events or characteristics which shape or determine the levels of program implementation. A preliminary list of hypotheses based on the analysis of factors enhancing or retarding implementation is derived for evaluation in Year III. Chapter V presents the design and preliminary result of the cost analysis. Tables and charts are included. (Author/CM)