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In this article the essential features of competency-based assessment are defined. Competency-based training is a phrase that is used by some to refer to a visionary new system and ridiculed by others who use it to refer to a mechanistic task oriented system that is actually behaviourism in disguise. The purpose of this article is to remove the confusion by defining the key terms 'competency' and 'assessment' and explaining the decisions that need to be taken when designing an assessment system and selecting methods that can be used to assess competency.