From how I am understanding the question, I believe that it is never good to miss a major milestone of a project. Having said this, the missed milestone is definitely a wakeup call to everyone in the project team that their planning and execution ideals are not in sync. This missed milestone must be assessed and addressed internally and a new/delayed plan of action must created (this is assuming no slack time was built in or already used up).

Also, as previously mentioned above, missing a milestone is nowhere near as bad as finishing the project on time and resulting in a faulty product. Missing a critical milestone may make investors and upper management unhappy while costing the project manager more money. This situation is still favorable to hitting all milestones on time and releasing a product that has flaws leading to its eventual recall. This is by far the worst case scenario for a company because not only does it cost exorbitant amounts of money, but it also damages the entire company’s reputation.

In the short term, missing a milestone may not be ideal for the project team, but it is by far preferable to rushing a project and having something go wrong post release.