This paper presents the application of fault tree analysis to calculate the probability of failure of a substation monitoring system based on branch phasor measurement units. Results of the fault tree analysis are used in a reliability-based model for the contingency-constrained phasor measurement units (PMUs) placement to find the minimum number of substations where the branch PMUs must be located for enhancing the wide area monitoring system reliability. The algorithm selects the minimal number of substations to monitor the power system under normal operation and the most credible contingencies. Finally, four indexes will be computed to evaluate the robustness of any monitoring system placement solution. The methodology is tested on the IEEE 9-bus and IEEE 57-bus test systems.