diff --git a/.rabbit/README.md b/.rabbit/README.md
new file mode 100644
index 0000000..34aa0ed
--- /dev/null
+++ b/.rabbit/README.md
@@ -0,0 +1,7 @@
+# Rabbit Context
+
+This directory keeps Rabbit-facing repo context and generated `dev.kit` evidence.
+
+- `context.yaml` is generated by `dev.kit repo`; do not edit it manually.
+- Keep human-authored Rabbit CI notes, delivery entry points, and repo-specific workflow guidance in this README.
+- After changing repo docs, manifests, scripts, or workflows, run `dev.kit repo` to refresh generated context.
diff --git a/.rabbit/context.yaml b/.rabbit/context.yaml
index da34818..0e7b86d 100644
--- a/.rabbit/context.yaml
+++ b/.rabbit/context.yaml
@@ -5,8 +5,8 @@ version: udx.dev/dev.kit/v1
 generator:
   tool: dev.kit
   repo: https://github.com/udx/dev.kit
-  version: 0.20.0
-  generated_at: 2026-07-08T15:15:15Z
+  version: 0.20.1
+  generated_at: 2026-07-10T09:48:47Z
   sources:
     homepage: https://udx.dev/kit
     repository: https://github.com/udx/dev.kit
diff --git a/README.md b/README.md
index 73ff837..116cc0e 100644
--- a/README.md
+++ b/README.md
@@ -2,13 +2,15 @@
 
 <https://udx.dev/kit>
 
-`dev.kit` turns repositories into self-explaining repo contracts for humans, scripts, and CI/CD.
+`dev.kit` provides repo context coverage for every handoff.
+
+It reads repo-owned docs, manifests, workflows, commands, dependencies, and gaps, then writes `.rabbit/context.yaml` so humans, agents, scripts, and CI/CD systems such as Rabbit CI can work from the same declared contract.
 
 It helps teams and repositories:
 
 1. understand how the repo actually works
 2. keep repo standards, manifests, refs, and dependency contracts traceable
-3. regenerate reliable context from repo signals instead of tribal knowledge
+3. regenerate reliable handoff context from repo signals instead of tribal knowledge
 
 The model is:
 
diff --git a/changes.md b/changes.md
index 4043d1e..6c824ca 100644
--- a/changes.md
+++ b/changes.md
@@ -1,5 +1,10 @@
 # Changes
 
+### 0.20.1
+
+- Keep declared root YAML contract discovery aligned with repo file filtering so gitignored local/private YAML is not promoted into generated context.
+- Seed missing `.rabbit/README.md` files so repos initialized by `dev.kit repo` have a clear Rabbit-facing notes surface without adding a generic `docs/README.md` stub.
+
 ### 0.20.0
 
 - Discover root YAML config contracts from explicit top-level `contract` / `contracts` metadata or typed `kind` + `version` manifests instead of filename-specific allowlists.
diff --git a/docs/how-it-works.md b/docs/how-it-works.md
index 30cf2ca..63c6239 100644
--- a/docs/how-it-works.md
+++ b/docs/how-it-works.md
@@ -1,6 +1,6 @@
 # How It Works
 
-`dev.kit` turns repo-declared structure into a working repo contract.
+`dev.kit` turns repo-declared structure into context coverage for repo handoffs.
 
 The default starting point is:
 
diff --git a/lib/modules/repo_scaffold.sh b/lib/modules/repo_scaffold.sh
index 0da8c25..b2f50ab 100644
--- a/lib/modules/repo_scaffold.sh
+++ b/lib/modules/repo_scaffold.sh
@@ -26,6 +26,15 @@ This repository uses \`dev.kit\` for repo-driven context coverage.
 
 - Run \`dev.kit\` to inspect environment and repo context status
 - Run \`dev.kit repo\` to regenerate \`.rabbit/context.yaml\`
+"
+
+  dev_kit_repo_write_if_missing "${repo_root}/.rabbit/README.md" "# Rabbit Context
+
+This directory keeps Rabbit-facing repo context and generated \`dev.kit\` evidence.
+
+- \`context.yaml\` is generated by \`dev.kit repo\`; do not edit it manually.
+- Keep human-authored Rabbit CI notes, delivery entry points, and repo-specific workflow guidance in this README.
+- After changing repo docs, manifests, scripts, or workflows, run \`dev.kit repo\` to refresh generated context.
 "
 
   dev_kit_repo_write_if_missing "${repo_root}/.github/dependabot.yml" "version: 2
@@ -293,9 +302,21 @@ EOF
 
 dev_kit_repo_declared_root_contract_manifest_files() {
   local repo_root="$1"
+  local candidate_files=""
   local manifest_path=""
   local manifest_rel=""
 
+  if dev_kit_sync_has_git_repo "$repo_root"; then
+    candidate_files="$(
+      (
+        cd "$repo_root" &&
+          git ls-files -z --cached --others --exclude-standard -- '*.yaml' '*.yml' 2>/dev/null
+      ) | tr '\0' '\n' | awk -v repo_root="$repo_root" 'NF && $0 !~ /\// && $0 !~ /^\./ { printf "%s/%s\n", repo_root, $0 }' | sort
+    )"
+  else
+    candidate_files="$(find "$repo_root" -maxdepth 1 -type f \( -name '*.yaml' -o -name '*.yml' \) 2>/dev/null | sort)"
+  fi
+
   while IFS= read -r manifest_path; do
     [ -f "$manifest_path" ] || continue
     manifest_rel="${manifest_path#"${repo_root}/"}"
@@ -310,7 +331,7 @@ dev_kit_repo_declared_root_contract_manifest_files() {
       printf '%s\n' "$manifest_rel"
     fi
   done <<EOF
-$(find "$repo_root" -maxdepth 1 -type f \( -name '*.yaml' -o -name '*.yml' \) 2>/dev/null | sort)
+$candidate_files
 EOF
 }
 
diff --git a/package-lock.json b/package-lock.json
index 5a5a785..7e95bda 100644
--- a/package-lock.json
+++ b/package-lock.json
@@ -1,12 +1,12 @@
 {
   "name": "@udx/dev-kit",
-  "version": "0.20.0",
+  "version": "0.20.1",
   "lockfileVersion": 3,
   "requires": true,
   "packages": {
     "": {
       "name": "@udx/dev-kit",
-      "version": "0.20.0",
+      "version": "0.20.1",
       "license": "MIT",
       "bin": {
         "dev-kit": "bin/dev-kit",
diff --git a/package.json b/package.json
index 5c1b774..49af2ed 100644
--- a/package.json
+++ b/package.json
@@ -1,6 +1,6 @@
 {
   "name": "@udx/dev-kit",
-  "version": "0.20.0",
+  "version": "0.20.1",
   "description": "Context-driven engineering toolkit for AI agents and developers",
   "license": "MIT",
   "repository": {
diff --git a/tests/suite.sh b/tests/suite.sh
index 53164b7..666e675 100644
--- a/tests/suite.sh
+++ b/tests/suite.sh
@@ -12,12 +12,14 @@ DOCUMENTED_SHELL_REPO="$REPO_DIR/tests/fixtures/documented-shell-repo"
 DOCKER_REPO="$REPO_DIR/tests/fixtures/docker-repo"
 SIMPLE_ACTION_REPO="$TEST_HOME/simple-action-repo"
 HOME_ACTION_REPO="$TEST_HOME/home-action-repo"
+DOCUMENTED_SHELL_ACTION_REPO="$TEST_HOME/documented-shell-action-repo"
 DOCKER_ACTION_REPO="$TEST_HOME/docker-action-repo"
 EMPTY_REPO="$TEST_HOME/empty-repo"
 IGNORED_ACTION_REPO="$TEST_HOME/ignored-action-repo"
 WORKFLOW_CONTRACT_REPO="$TEST_HOME/workflow-contract-repo"
 DECLARED_CONFIG_REPO="$TEST_HOME/declared-config-repo"
 REFERENCE_DOC_COMMAND_REPO="$TEST_HOME/reference-doc-command-repo"
+PRESERVED_RABBIT_REPO="$TEST_HOME/preserved-rabbit-repo"
 AVAILABLE_TEST_GROUPS="core repo-contract"
 TEST_ONLY="${DEV_KIT_TEST_ONLY:-}"
 
@@ -115,6 +117,9 @@ setup_declared_config_repo() {
 # Declared Config Repo
 
 Runtime variables are declared in `work-conf.yaml`.
+EOF
+  cat > "$repo_dir/.gitignore" <<'EOF'
+local-private.yaml
 EOF
   cat > "$repo_dir/work-conf.yaml" <<'EOF'
 ---
@@ -134,6 +139,13 @@ contract:
   purpose: local automation interface notes
 refs:
   - README.md
+EOF
+  cat > "$repo_dir/local-private.yaml" <<'EOF'
+---
+kind: localPrivateConfig
+version: example.dev/private-v1/config
+config:
+  env: {}
 EOF
   cat > "$repo_dir/source-notes.yaml" <<'EOF'
 # Source notes with references are useful context, but not a manifest contract.
@@ -235,6 +247,7 @@ if should_run_explicit "repo-contract"; then
   declared_config_dependencies="$(awk '/^dependencies:/{flag=1;next} /^# /{if(flag) exit} flag{print}' "$declared_config_context_yaml")"
   assert_contains "$declared_config_dependencies" "repo: example/runtime" "repo contract: traces declared root YAML manifest owner as dependency"
   assert_not_contains "$(cat "$declared_config_context_yaml")" "path: source-notes.yaml" "repo contract: does not promote source comments alone to manifest"
+  assert_not_contains "$(cat "$declared_config_context_yaml")" "path: local-private.yaml" "repo contract: excludes gitignored root YAML contracts"
 fi
 
 if should_run "core"; then
@@ -382,7 +395,9 @@ if should_run "core"; then
   assert_contains "$env_json" "\"command\": \"env\"" "env: reports command name"
   assert_contains "$env_json" "\"workflow\": {" "env: reports workflow contract"
 
-  repo_json="$(cd "$DOCUMENTED_SHELL_REPO" && dev.kit repo --json)"
+  cp -R "$DOCUMENTED_SHELL_REPO" "$DOCUMENTED_SHELL_ACTION_REPO"
+
+  repo_json="$(cd "$DOCUMENTED_SHELL_ACTION_REPO" && dev.kit repo --json)"
   assert_contains "$repo_json" "\"archetype\":" "repo: reports archetype"
   assert_contains "$repo_json" "\"context\":" "repo: reports context path"
   assert_contains "$repo_json" "\"context_status\": \"current\"" "repo: reports current workflow context after write"
@@ -391,7 +406,7 @@ if should_run "core"; then
   assert_contains "$repo_json" "\"id\": \"confirm-research-fix-loop\"" "repo: includes confirmation loop action"
   assert_contains "$repo_json" "\"workflow\": {" "repo: reports workflow contract"
 
-  repo_text="$(cd "$DOCUMENTED_SHELL_REPO" && dev.kit repo)"
+  repo_text="$(cd "$DOCUMENTED_SHELL_ACTION_REPO" && dev.kit repo)"
   assert_contains "$repo_text" "[workflow]" "repo text: renders workflow section"
   assert_contains "$repo_text" "[read first]" "repo text: renders read first section"
   assert_contains "$repo_text" "[factors]" "repo text: renders factors section"
@@ -407,7 +422,7 @@ if should_run "core"; then
       printf 'boom\n' >&2
       return 42
     }
-    dev_kit_cmd_repo text "$DOCUMENTED_SHELL_REPO" 2>&1
+    dev_kit_cmd_repo text "$DOCUMENTED_SHELL_ACTION_REPO" 2>&1
   )"
   repo_write_failure_status=$?
   set -e
@@ -504,6 +519,7 @@ EOF
   declared_config_dependencies="$(awk '/^dependencies:/{flag=1;next} /^# /{if(flag) exit} flag{print}' "$declared_config_context_yaml")"
   assert_contains "$declared_config_dependencies" "repo: example/runtime" "declared config repo: traces explicit root YAML manifest owner as dependency"
   assert_not_contains "$(cat "$declared_config_context_yaml")" "path: source-notes.yaml" "declared config repo: does not promote source comments alone to manifest"
+  assert_not_contains "$(cat "$declared_config_context_yaml")" "path: local-private.yaml" "declared config repo: excludes gitignored root YAML contracts"
 
   mkdir -p "$WORKFLOW_CONTRACT_REPO/.github/workflows"
   git -C "$WORKFLOW_CONTRACT_REPO" init >/dev/null 2>&1
@@ -558,6 +574,22 @@ EOF
   assert_not_contains "$(cat "$reference_doc_context_yaml")" "run: make build" "reference docs repo: ignores reference-only build example"
   assert_not_contains "$(cat "$reference_doc_context_yaml")" "run: make run" "reference docs repo: ignores reference-only run example"
 
+  mkdir -p "$PRESERVED_RABBIT_REPO/.rabbit" "$PRESERVED_RABBIT_REPO/docs"
+  git -C "$PRESERVED_RABBIT_REPO" init >/dev/null 2>&1
+  cat > "$PRESERVED_RABBIT_REPO/README.md" <<'EOF'
+# Preserved Rabbit Docs Repo
+EOF
+  cat > "$PRESERVED_RABBIT_REPO/.rabbit/README.md" <<'EOF'
+# Existing Rabbit Notes
+
+Keep this repo-specific Rabbit CI guidance.
+EOF
+  preserved_rabbit_json="$(cd "$PRESERVED_RABBIT_REPO" && dev.kit repo --json)"
+  assert_contains "$preserved_rabbit_json" "\"context\":" "preserved rabbit repo: reports context path"
+  assert_contains "$(cat "$PRESERVED_RABBIT_REPO/.rabbit/README.md")" "Existing Rabbit Notes" "preserved rabbit repo: keeps existing rabbit README"
+  assert_not_contains "$(cat "$PRESERVED_RABBIT_REPO/.rabbit/README.md")" "This directory keeps Rabbit-facing repo context" "preserved rabbit repo: does not overwrite rabbit README"
+  assert_file_missing "$PRESERVED_RABBIT_REPO/docs/README.md" "preserved rabbit repo: does not create generic docs README"
+
   mkdir -p "$EMPTY_REPO"
   git -C "$EMPTY_REPO" init >/dev/null 2>&1
 
@@ -573,11 +605,15 @@ EOF
 
   assert_file_exists "$EMPTY_REPO/README.md" "empty repo: creates README"
   assert_file_exists "$EMPTY_REPO/docs" "empty repo: creates docs dir"
+  assert_file_missing "$EMPTY_REPO/docs/README.md" "empty repo: does not create generic docs README"
   assert_file_exists "$EMPTY_REPO/.rabbit" "empty repo: creates rabbit dir"
+  assert_file_exists "$EMPTY_REPO/.rabbit/README.md" "empty repo: creates rabbit README"
   assert_file_exists "$EMPTY_REPO/.github/workflows" "empty repo: creates workflows dir"
   assert_file_exists "$EMPTY_REPO/.github/dependabot.yml" "empty repo: creates dependabot config"
   assert_contains "$(cat "$EMPTY_REPO/.github/dependabot.yml")" "package-ecosystem: github-actions" "empty repo: dependabot targets github actions"
   assert_contains "$(cat "$EMPTY_REPO/README.md")" "This repository uses \`dev.kit\`" "empty repo: seeds README"
+  assert_contains "$(cat "$EMPTY_REPO/.rabbit/README.md")" "Rabbit-facing repo context" "empty repo: seeds rabbit README"
+  assert_contains "$(cat "$EMPTY_REPO/.rabbit/README.md")" "\`context.yaml\` is generated by \`dev.kit repo\`" "empty repo: explains generated context"
 fi
 
 printf "ok - dev.kit suite completed\n"