Teaching English as a second language (ESL) to competencies requires that the instructional focus be on functional competencies and life-coping skills while developing the spoken and/or written English structures necessary to perform these skills. A step-by-step approach to develop and implement a competency-based approach to ESL for adults is outlined. The outline and discussion are presented in four parts: (1) a review of competencies and Adult Basic Education with special attention to the Adult Performance Level Study; (2) an annotated list of the advantages and problems of using a competency-based approach to adult ESL; (3) a program for developing a competency-based approach which includes identifying needs, writing competency statements, specifying the content of teaching objectives, and examples of lesson plans for teaching the same competencies at different levels and for sequencing competencies to spiral the content of lessons; and (4) a discussion of performance testing. A bibliography of suggested resources and an annotated bibliography of materials for use in competency-based ESL programs are appended. (AMH)