I got into a mini-argument with my boss recently regarding "project failure." After three years, our project to migrate a codebase to a new platform (a project I was on for 1.5 years, but my team lead was on for only a few months) went live. He, along with senior management of both my company and the client (I'm one of those god-awful consultants you hear so much about. My engagement is an "Application Outsourcing") declared the project to be a success. I disagreed, stating that old presentations I had found showed that compared to the original schedule, the delay in deployment was best measured in months and could potentially be measured in years. I explained what I know of project failure, and the studies and statistics behind failure rates. He responded that that was all academia, and that no project he led had failed, thanks to the wonders of change/risk management - what seems to come down to explaining delays and re-evaluating the schedule based on new data.
Maybe consulting like this differs from other projects, but it seems like this is just failure wrapped up in a prettier name to avoid the stigma of having failed to deliver on time, on budget, or with full functionality. The fact that he explained that my company gave away hours of work for free in order to finish the project within the maxed out budget says a lot.
So I ask you this:
I think, most of the time, we developers forget this we all do is, after all, about bussiness.
From that point of view a project is not a failure while the client is willing to pay for it. It all depends on the client, some clients have more patience and understand better the risks of software development, other just won't pay if there's a substantial delay.
Anyway, about your question. Whenever you evolve a project there are risks involved, maybe you schedule the end of the project in a certain date but it will take like six month longer than you expected. In that case you have to balance what you have already spent and what you have to gain against the risks you're taking. There's actually an entire science called "decision making" that studies it at software level, so your boss is not wrong at all.
Let's look at some questions, Is the client willing to wait for the project? Is he willing to assume certain overcosts? Even if he doesn't, Is worth completing the project assuming the extra costs instead of throwing away all the already done work? Can the company assume what's already lost?
The real answer to your problem lies behind that questions. You can't establish a point and say, here, if the project isn't done by this time then it's a failure. As for your specific situation, who knows? Your boss has probably more information that you have so your work is to tell him how is the project going, how much it will take and how much it will cost (in terms hours/man if you wish)