The process of generating high quality data for the test and evaluation of diagnostic and prognostic algorithms is still of high importance to the Prognostics and Health Management (PHM) research community. To support these efforts a testbed has been designed, manufactured and commissioned. It has specifically been designed in order to replicate several component degradation faults with high accuracy and high repeatability. This paper documents the design, requirements and the data integrity elements of this benchmark hydraulic system. This document consolidates the process of designing diagnostics testbeds as at present there is a lack of literature on how diagnostics testbeds should be built and is intended to serve as a starting point and quick reference guide for engineers and researchers intending to design and develop a testbed to test and validate PHM applications. The first part of this paper highlights design requirements for all the design aspects for such testbeds with great consideration for industry standards and best practices covering the achievement of electromagnetic compatibility (EMC) and noise mitigation, as well as operators’ safety and equipment protection. The second part of the paper put great emphasis on data integrity elements of the data generated by this testbed (describing the system under healthy and faulty conditions) before it is actually used for system characterization or by diagnostics and prognostics algorithms.