The Massachusetts Policy on Basic Skills Improvement was formulated to help students master basic skills prior to high school graduation. The aim of this guide is to assist local districts in complying with the policy's requirements for the setting of minimal standards according to levels of achievement students are expected to reach on stated objectives. Four methods are recommended as acceptable standard setting procedures: the Angoff and Nedelsky methods, which are based upon judgments concerning the test items; and the Borderline Group and Contrasting Groups methods; which require judgments concerning the mastery status of the students taking the test. Each procedure is outlined and its appropriateness, advantages and disadvantages documented. Guidelines for selecting judges, and interpreting, using and monitoring standards are also provided. Since regulations do exist which govern standard setting and reporting, information is included on how to include parents, employers, secondary school students, public representatives, teachers and administrators in the standard setting procedure: in defining minimally acceptable performance prior to standard setting; serving as judges rating expected performance; reviewing proposed standards; and comparing standards derived from various methods. Sample student rating forms and judges recording forms are presented and the contrasting groups method paradox is discussed in the appendixes. (AEF)