diff --git a/module_build_service/scheduler/handlers/repos.py b/module_build_service/scheduler/handlers/repos.py
index 57c97ee3..68b74c06 100644
--- a/module_build_service/scheduler/handlers/repos.py
+++ b/module_build_service/scheduler/handlers/repos.py
@@ -106,7 +106,8 @@ def done(config, session, msg):
     unbuilt_components = [
         c for c in module_build.component_builds
         if (c.state != koji.BUILD_STATES['COMPLETE']
-            and c.state != koji.BUILD_STATES["FAILED"])
+            and c.state != koji.BUILD_STATES["FAILED"]
+            and c.state != koji.BUILD_STATES["CANCELED"])
     ]
 
     further_work = []
@@ -130,7 +131,20 @@ def done(config, session, msg):
             return further_work
 
     else:
-        module_build.transition(config, state=models.BUILD_STATES['done'])
+        # We know that there are no unbuilt components in this module build,
+        # so we can mark the state as "done" or "failed (in case there are
+        # some failed or canceled components in a build).
+        failed_component_present = False
+        for c in module_build.component_builds:
+            if c.state in (koji.BUILD_STATES['FAILED'],
+                           koji.BUILD_STATES["CANCELED"]):
+                failed_component_present = True
+                break
+        if failed_component_present:
+            module_build.transition(config, state=models.BUILD_STATES['failed'],
+                                    state_reason="Some components failed to build.")
+        else:
+            module_build.transition(config, state=models.BUILD_STATES['done'])
         session.commit()
         builder.finalize()
 
diff --git a/tests/__init__.py b/tests/__init__.py
index be4a91d9..42f44aac 100644
--- a/tests/__init__.py
+++ b/tests/__init__.py
@@ -183,7 +183,7 @@ def init_data():
             session.commit()
 
 
-def scheduler_init_data():
+def scheduler_init_data(communicator_state = None):
     db.session.remove()
     db.drop_all()
     db.create_all()
@@ -217,7 +217,7 @@ def scheduler_init_data():
          '#da95886c8a443b36a9ce31abda1f9bed22f2f9c2')
     component_one_build_one.format = 'rpms'
     component_one_build_one.task_id = 12312345
-    component_one_build_one.state = None
+    component_one_build_one.state = communicator_state
     component_one_build_one.nvr = 'communicator-1.10.1-2.module_starcommand_1_3'
     component_one_build_one.batch = 2
     component_one_build_one.module_id = 1
diff --git a/tests/test_scheduler/test_repo_done.py b/tests/test_scheduler/test_repo_done.py
index 8094db7a..c7a02b81 100644
--- a/tests/test_scheduler/test_repo_done.py
+++ b/tests/test_scheduler/test_repo_done.py
@@ -29,7 +29,7 @@ import module_build_service.messaging
 import module_build_service.scheduler.handlers.repos
 import module_build_service.models
 from tests import scheduler_init_data
-from tests import conf, db
+from tests import conf, db, app
 
 base_dir = dirname(dirname(__file__))
 cassette_dir = base_dir + '/vcr-request-data/'
@@ -99,3 +99,27 @@ class TestRepoDone(unittest.TestCase):
             .filter_by(package='communicator').one()
         self.assertEquals(component_build.state_reason,
                           'Failed to submit artifact communicator to Koji')
+
+    @mock.patch('module_build_service.builder.KojiModuleBuilder.list_tasks_for_components', return_value=[])
+    @mock.patch('module_build_service.builder.KojiModuleBuilder.buildroot_ready', return_value=True)
+    @mock.patch('module_build_service.builder.KojiModuleBuilder.get_session')
+    @mock.patch('module_build_service.builder.KojiModuleBuilder.build')
+    @mock.patch('module_build_service.builder.KojiModuleBuilder.buildroot_connect')
+    @mock.patch("module_build_service.builder.GenericBuilder.default_buildroot_groups", return_value = {'build': [], 'srpm-build': []})
+    def test_failed_component_build(self, dbg, connect, build_fn, config, ready, list_tasks_fn):
+        """ Test that when a KojiModuleBuilder.build fails, the build is
+        marked as failed with proper state_reason.
+        """
+        with app.app_context():
+            scheduler_init_data(3)
+            config.return_value = mock.Mock(), 'development'
+            build_fn.return_value = None, 4, 'Failed to submit artifact communicator to Koji', None
+
+            msg = module_build_service.messaging.KojiRepoChange(
+                'some_msg_id', 'module-starcommand-1.3-build')
+            module_build_service.scheduler.handlers.repos.done(
+                config=conf, session=db.session, msg=msg)
+            module_build = module_build_service.models.ModuleBuild.query\
+                .filter_by(name='starcommand').one()
+
+            self.assertEquals(module_build.state, module_build_service.models.BUILD_STATES["failed"])