This report examines major issues, concepts and methods of bus transit performance evaluation and suggests procedures and guidelines for internal and external monitoring in Washington State. In support of suggested procedures, data analysis on six years of operational and financial characteristics of Washington State systems, 1979-80 Section 15 data, and collected samples of small community/rural systems from other states was conducted. The major objective of the analysis was to test methodologies for developing and assessing transit "peer groups" relative to size and scale of operations, and prior to comparative within-group evaluation. The methodology entailed employing cluster analysis using up to 10 variables depicting service design and distribution. Two key variables were population and line miles. Problems were encountered in using Section 15 data. Due to its use of urban area, as opposed to service area population, clear distinctions of operating environments could not be determined. Thus, cluster groupings using Section 15 data were inconclusive. Cluster groupings using sample data for rural/small community systems (1980) and Washington State systems (1980) were satisfactory and following additional verification, a suggested "peer group" classification for Washington State was recommended. The seven group types ranged in size from a rural regional (less than 40,000 population) to metropolitan (greater than 1,000,000 population). Values for 8 efficiency and effectiveness indicators were used to assess "peer group" trends in performance in Washington over a five-year period (1976-80). Comparative evaluations of individual systems were not made. Despite only partial success in determining "peer groups," the study does identify methods and procedures for assisting in external and internal performance evaluation.