Assessing Market Rates and Analyzing the Cost of Child Care
The objective in determining the market rate is to understand what the general population is being charged for child care services by providers, so that payment rates can be set to allow CCDF families equal access to the full range of child care available to families not receiving subsidies. While there is no threshold set for equal access, a benchmark of the 75th percentile of rates reported in the market rate survey is recommended for payment rates.
Based on the requirements in the CCDBG Act, Lead Agencies must conduct, no earlier than 2 years before the submission of their CCDF Plan, a statistically valid market rate survey or ACF pre-approved alternative methodology such as a cost estimation model to set provider payment rates. Lead Agencies must reevaluate their rates every 3 years. A market rate survey is an examination of fees that child care providers typically charge and parents typically pay per unit of care (for example, per week or per hour) in the priced child care market. Assessing costs could be part of an ACF pre-approved alternative methodology to conducting a market rate survey or it could refer to conducting a narrow cost analysis. Regardless of the method selected (market rate survey or ACF pre-approved alternative methodology) a narrow cost analysis is required.
A market rate survey must reflect variations in the price of child care services by geographic area, type of provider, and age of child. The Administration for Children and Families (ACF) established a set of benchmarks, largely based on CCDF-funded research, to identify the components of a valid and reliable market rate survey. 
Based on the findings from the CCDF-funded research, in order for a market rate survey to be statistically valid and reliable, it must
- represent the child care market,
- provide complete and current data,
- use rigorous data collection procedures,
- reflect geographic variation, and
- analyze data in a manner that captures other relevant differences.
For guidance on the validity of market rate surveys, we recommend that states consult Market Rate Survey Training.
CCDF regulations require Lead Agencies to consult with 1) the State Advisory Council or similar coordinating body, local child care program administrators, local child care resource and referral agencies, and other appropriate entities and 2) organizations representing caregivers, teachers, and directors before developing and conducting their market rate survey or ACF pre-approved alternative methodology approaches.
Once the market rate survey or ACF pre-approved alternative methodology is completed, Lead Agencies must prepare a detailed report containing the results of the survey or ACF pre-approved alternative methodology, and make the results widely available no later than 30 days after completion, including by posting the results on the Internet. The detailed report must include these elements:
- The results of the market rate survey or ACF pre-approved alternative methodology
- The estimated cost of care (including any relevant variation by geographic location, category of provider, or age of child) to support the following: (1) the child care providers’ implementation of the health, safety, quality, and staffing requirements; and (2) higher quality care at each level of quality, as defined by the Lead Agency using a quality rating and improvement system (QRIS) or other system of quality indicators. For states without a QRIS or for a state with a QRIS system that is currently limited to only certain providers, those states may use other quality indicators (for example, provider status related to accreditation, PreK standards, Head Start (HS) performance standards, school-age quality standards, or state defined quality measures).
- The Lead Agency’s response to the public and stakeholder views and comments.
Finally, Lead Agencies must set CCDF subsidy payment rates in accordance with the results of the most recent market rate survey or ACF pre-approved alternative methodology.
 Grobe, D., Weber, R., Davis, E., Kreader, L., & Pratt, C. (2008). Study of market prices: Validating child care market rate surveys. Oregon State University Family Policy Program, Oregon Child Care Research Partnership.