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The Software Engineering Institute (SEI) is undertaking a feasibility study of “componentbased software engineering”(CBSE). The objective of this study is to determine whether CBSE has the potential to advance the state of software engineering practice and, if so, whether the SEI can contribute to this advancement. This report is the second part of a threepart report on the study. Volume I contains a market assessment for CBSE. Volume III outlines a proposed course of action for the SEI. Volume II, this report, establishes the technical foundation for SEI work in CBSE. The paper asserts that the key technical challenge facing CBSE is to ensure that the properties of a system of components can be predicted from the properties of the components themselves. The key technical concepts of CBSE that are needed to support this vision are described: component, interface, contract, component model, component framework, composition, and certification.