Detecting and isolating multiple faults is a computationally intense task which typically consists of computing a set of tests, and then computing the diagnoses based on the test results. This paper proposes a method to reduce the computational burden by only running the tests that are currently needed, and dynamically starting new tests when the need changes. A main contribution is a method to select tests such that the computational burden is reduced while maintaining the isolation performance of the diagnostic system. Key components in the approach are the test selection algorithm, the test initialization procedures, and a knowledge processing framework that supports the functionality needed. The approach is exemplified on a relatively small dynamical system, which still illustrates the complexity and possible computational gain with the proposed approach.