This paper presents a robust and optimal Phasor Measurement Unit (PMU) placement scheme for real time power system monitoring under both normal and contingency cases. The single branch outage and single PMU loss are considered as contingencies. Initially the Virtual Node Reduction Technique (VNRT) is applied to reduce the system nodes. The virtual nodes are neither physically present nor suitable for PMU placement. Then, the optimal PMUs are obtained using Biogeography Based Optimization (BBO) with the reduced system nodes. In the PMU placement study, the virtual node reduction technique is applied for reducing the scale of the system. Developed placement algorithm is illustrated using IEEE standard systems to demonstrate the effectiveness of the proposed algorithm. © 2013 IEEE.