The U.S. Department of Education awarded 19 Challenge Grants for Technology in Education in fiscal year 1995 and an additional 24 in fiscal year 1996. These large-scale development projects are intended to mobilize resources, develop technology-enabled learning environments, and provide lessons to others seeking to make effective use of technology in education. Each grantee is required to conduct a project evaluation. This sourcebook provides guidance and materials to support the development and implementation of evaluations by Challenge Grant project managers and evaluators. Since project proposals vary greatly, the sourcebook provides an over-arching approach to managing the evaluation process to make the most use out of the information being produced to improve project outcomes. Each project should have a single evaluation effort beginning during the planning stage and integrally involved throughout its operations. The evaluation provides: (1) the means for developing and communicating expectations; (2) regular feedback to project leaders and other participants; (3) documentation of project outcomes and lessons learned; and (4) accountability to funders and key stakeholders. The sourcebook covers: evaluation as a part of planning and improvement; evaluation design issues; tracking and documenting progress using portfolios; and guidance for managers and evaluators. Appendices include formats, templates, and an example progress portfolio; annotated bibliography on educational evaluation; list of contacts; and sample planning and data collection instruments. (Contains 28 references.) (SWC)