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Automated contingency management (ACM), or the ability to confidently and autonomously adapt to fault and/or contingency conditions with the goal of still achieving mission objectives, can be considered the ultimate technological goal of a health management system. To establish confidence on the ACM system, objective performance evaluations should be executed. The need for verification and validation (V&V) techniques for ACM has also been specifically identified by DOD agencies and within the NASA community recently. This paper presents a general process and related techniques for developing and validating ACM systems for advanced propulsion systems. A novel ACM modeling paradigm, optimization-based ACM strategies, V&V approaches and performance metrics are developed. While some well-established formal methods such as model checking techniques are applicable to some sub-problems, this research has been more focused on innovative informal methods that attempt to address ACM performance requirements, optimality, robustness, etc. A pressure fed, monopropellant propulsion system for a small space flight vehicle is utilized as initial proof-of-concept implementation for the proposed techniques and preliminary simulation results are presented.