The major sub-systems that comprise the proposed system design should be identified and their functional relationships established with respect to the system functions. If the functional configuration of the system can vary during operational use, then each configuration must be identified separately. The system performance requirements should be detailed and the conditions that constitute a system failure defined. If a particular failure condition applies only to a limited part of the operational duty cycle as described in the next section, then this should be noted.

For modelling purposes, the functional relationships within a system must be developed through successive levels of the assembly to the component/part level. For a large system, it is generally best to establish the relationships between the major sub-systems first, and then to consider each sub-system individually.

Functional block diagrams (or other similar methods) should be used to show the functional relationships within a system in a concise and visual manner. Descriptive notes should be made on the diagrams to provide more detailed information that cannot be portrayed directly by the diagram. A complex system may need a large number of functional block diagrams to describe it, and so diagrams must be clearly referenced so that they can be easily cross-referenced.