In this paper, the problem of fail-safe design of complex structural systems is considered. A substructural formulation for this class of design problems is presented. Constraints are imposed on stresses, deflections, natural frequency, and member sizes. It is shown that a structure can be designed to withstand the projected future damage. It is also shown that the substructural formulation offers computational advantage for both structural analysis and design sensitivity analysis parts of an optimal design algorithm. Fail-safe designs of open truss and closed helicopter tailbooms are obtained using a program developed based on the substructural formulation.