Abstract: We study the problem of optimally allocating effort between software construction and debugging. As construction proceeds, new errors are introduced into the system. The objective is to deliver a system of the highest possible quality (fewest number of errors) subject to the constraint that N system modules are constructed in a specified duration T. If errors are not corrected during construction, then further construction can produce errors at a faster rate. To curb the growth of errors, some of the effort must be taken away from construction and assigned to testing and debugging. A key finding of this model is that the practice of alternating between pure construction and pure debugging is suboptimal. Instead, it is desirable to concurrently construct and debug the system. We extend the above model to integrate decisions traditionally considered "external" such as the time to release the product to the market with those that are typically treated as "internal" such as the division of effort between construction and debugging. Results show that integrating these decisions can yield significant reduction in the overall cost. Also, when competitive forces are strong, it may be better to release a product early (with more errors) than late (with fewer errors). Thus underestimating the cost of errors in the product may be better than overestimating the cost.