diff --git a/.coveragerc b/.coveragerc
new file mode 100644
index 0000000000..c58219e418
--- /dev/null
+++ b/.coveragerc
@@ -0,0 +1,25 @@
+[run]
+source = ansibleworks
+branch = True
+omit = ansibleworks/main/migrations/*
+
+[report]
+# Regexes for lines to exclude from consideration
+exclude_lines =
+    # Have to re-enable the standard pragma
+    pragma: no cover
+
+    # Don't complain about missing debug-only code:
+    def __repr__
+    if self\.debug
+
+    # Don't complain if tests don't hit defensive assertion code:
+    raise AssertionError
+    raise NotImplementedError
+
+    # Don't complain if non-runnable code isn't run:
+    if 0:
+    if __name__ == .__main__.:
+
+ignore_errors = True
+
diff --git a/.gitignore b/.gitignore
index 83db0826e7..6c284453ea 100644
--- a/.gitignore
+++ b/.gitignore
@@ -1,10 +1,16 @@
 ansibleworks/settings/local_settings.py*
-ansibleworks/acom.sqlite3
+ansibleworks/*.sqlite3
 ansibleworks/projects
 ansibleworks/public/media
 ansibleworks/public/static
 env/*
 build
 dist
+htmlcov
+*.egg-info
 *.py[c,o]
 *.swp
+.coverage
+coverage.xml
+pep8.txt
+
diff --git a/Makefile b/Makefile
index 45d61e0d56..118cebac71 100644
--- a/Makefile
+++ b/Makefile
@@ -58,6 +58,14 @@ dbshell:
 test:
 	python manage.py test main
 
+test_coverage:
+	# Run tests with coverage enabled.
+	coverage run manage.py test main
+
+coverage_html:
+	# Output test coverage as HTML (into htmlcov directory).
+	coverage html
+
 dev_build:
 	python setup.py dev_build
 
diff --git a/app_setup/setup.yml b/app_setup/setup.yml
index 7da21689cb..ffcea6b52c 100644
--- a/app_setup/setup.yml
+++ b/app_setup/setup.yml
@@ -28,7 +28,11 @@
              - python-devel             # only because pexpect comes from pip
              - python-lxml              # xml for ?format=xml instead of json (optional)
 
-      - name: install python modules from pip
+      # python-setuptools package is old (0.6.10, ~2009) vs. latest distribute (0.6.40)
+      - name: install latest distribute from pypi
+        pip: name=distribute state=latest
+
+      - name: install python modules via pip
         pip: requirements=${working_dir}/requirements.txt
 
       - name: configure the database authentication more or less open for setup
diff --git a/app_setup/templates/local_settings.py.j2 b/app_setup/templates/local_settings.py.j2
index b6435d0fed..71f28124e1 100644
--- a/app_setup/templates/local_settings.py.j2
+++ b/app_setup/templates/local_settings.py.j2
@@ -1,21 +1,7 @@
-# Local Django settings for Ansible Commander project.
-
 # Copyright (c) 2013 AnsibleWorks, Inc.
-#
-# This file is part of Ansible Commander.
-# 
-# Ansible Commander is free software: you can redistribute it and/or modify
-# it under the terms of the GNU General Public License as published by
-# the Free Software Foundation, version 3 of the License.
-#
-# Ansible Commander is distributed in the hope that it will be useful,
-# but WITHOUT ANY WARRANTY; without even the implied warranty of
-# MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE. See the
-# GNU General Public License for more details.
-# 
-# You should have received a copy of the GNU General Public License
-# along with Ansible Commander. If not, see <http://www.gnu.org/licenses/>.
+# All Rights Reserved.
 
+# Local Django settings for AnsibleWorks project.
 
 from development import *
 
diff --git a/requirements.txt b/requirements.txt
index 4d337bd330..bf1c51c640 100644
--- a/requirements.txt
+++ b/requirements.txt
@@ -1,15 +1,26 @@
-Django==1.5.1
-django-celery==3.0.11
-django-devserver==0.5.0
-django-extensions==1.1.1
-django-jsonfield==0.9.2
-ipython==0.13.1
-pexpect==2.4
-# psycopg2==2.4.6
-python-dateutil==1.5
-# PyYAML==3.10
-South==0.7.6
-requests
-djangorestframework
-markdown  
+# PIP requirements for AnsibleWorks development/build environment.
+# Install using "pip -r requirements.txt"
+
+Django>=1.5
+django-celery
+django-devserver
+django-extensions
 django-filter
+django-jsonfield
+djangorestframework
+ipython
+markdown
+pexpect
+python-dateutil
+PyYAML
+South
+
+# You may also need to install the following extra packages using the OS
+# package manager, or pip if you're running inside a virtualenv.
+# - ansible (via yum, pip or source checkout)
+# - distribute (Use the latest version via "pip install -U distribute"; the
+#   default python-setuptools package is old.)
+# - psycopg2 (via "yum install python-psycopg2")
+# - coverage (if you want to check test coverage, via "pip install coverage";
+#   the default python-coverage package is old.)
+# - readline (for using the ipython interactive shell)