Abstract: The present invention relates to a technique for operation on a computer for developing the knowledge base for ultimately providing very fast and cost-efficient fault diagnosis systems. The present technique uses an effective hierarchy of rules where at a first level are rules which allow the arrangement of the system under test to be decomposed into a hierachy of sequential and parallel subsystems. At the second level are rules that generate the efficient testing rules for each pure subsystem. The second level rules can be compared to a node evaluation function in a typical problem of searching a graph to select the best node for expansion from a current list of candidate nodes, so that the best path to the correct system diagnosis is found in the shortest amount of time using a minimum of user input. Two heuristic rules are applied to speed-up the process of selecting the node as the best candidate for expansion.