Bi-Level Integrated System Synthesis (BLISS) is an approach that allows design problems to be naturally decomposed into a set of subsystem optimizations and a single system optimization. In the BLISS approach, approximate mathematical models are used to transfer information from the subsystem optimizations to the system optimization. Accurate approximation models are therefore critical to the success of the BLISS procedure. In this paper, new capabilities that are being developed to generate accurate approximation models for BLISS procedure will be described. The benefits of using flexible approximation models such as Kriging will be demonstrated in terms of convergence characteristics and computational cost. An approach of dealing with cases where subsystem optimization cannot find a feasible design will be investigated by using the new flexible approximation models for the violated local constraints.