The Fastrac rocket engine is currently being developed for the X-34 technology demonstrator vehicle. The engine performance model must be calibrated to support accurate performance prediction. Data reduction is the process of estimating hardware characteristics from available test data, and is essential for effective performance model calibration and prediction. A new data reduction procedure was developed, implemented, and tested using data from Fastrac engine tests. The procedure selects hardware and test measurements to use in the reduction process based on examination of the model influence matrix condition number. Predicted hardware characteristics are recovered from the solution of a quadratic programming problem. Computational tests indicate that the new procedure provides a significant improvement in test data reduction capability. Enhancements include improved test data utilization and time history data reduction capability. The new method is generically applicable to other systems.