JPRS ID: 9611 USSR REPORT ECONOMIC AFFAIRS

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JPRS L/9611
16 March 198~1
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ECONOMIC AFFAIRS
CFOUO 3/81)
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26 February 1981
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JPRS L/9611
16 March 1981
- USSR REPORT
ECONOMIC AFFAIRS
(FOUO 3/81)
CONTENTS
ECONOMIC POLICY, ORGANTZATI!JN AND MANAGII~IENT
Regulation of Inventions in USSR Discussed
(V. R. Skripko; VESTNIK AKADII~III NAUK SSR, Dac 80) 1
Management Strives To Improve Product Quality
(A. Glichev; VOPROSY L'ICONOMIKI, Dec 80) 9
PLANNING AND PLAN IMPLEMENTATION
_ ~ Programmed Measures To Improve Economic Management Cited
(V. Ivanchenko; VOPROSY ERONOMIKI, Oct 80) 23
INTRODUCTION OF NEW TECHNOLOGY
~ Better Technical Progress Indicators Sought
(V. Astaf'yev, et al; VOPROSY EKONOMIKI, Dec 80).0 35
- a - [I?'S - USSR - 3 FOUO]
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ECONOMIC POLICY, ORGANIZATION AND MANAGEMENT
REGUTATION OF INVENTIONS IN USSR DISCUSSED
Moecaw VESTNIK AKADEMCI NAUK SSR in Ruasiaa No 12, Dec 80 pp 55-61
[Article by Doctor of Juridical Sciences V. R. Skripko: "Legal Regulation of In-
- ventions in USSR"]
[Text) The CPSU Central Couanittee decree on "Socialiat Competition for a Worthy
Welcome to the 26th CPSU Congresa" emphasizes the fact that the circumstances of
_ scientific-technical progress uaake it neceasary to direct the eFforts of the
- scientists, specialists, inventors and efficiency experts to the task of resolv- ~
- ing the fundamental problems of technical improvement and intensification of
productioa, development and introduction of the most m~dern mear.e of inechaniza-
tioa and autamation, progressive technology, and scientific organization of labor.
Article 47 of the USSR Constitution guarantees to the citizens freedom of
scientific and technical creative endeavor. The Soviet state provides thP
necessary physical conditions for this purpose; it organizes the introduction of
inventions and rationalization suggestions ia the national economy anc~ the other
sph~res of social living.
In our country the activity in the field of invention has became a sigctificant
factor in increasing labor productivity and enhancing the quality and technical
level of tlhe output. Thi~ helps itt the development of the productive forces and
makes a great impact on the econamic system. The period of the Ninth Five-Year
_ Plan, for example, saw the introduction of 195,000 inventiona in the national
economy and ttie adoption of 18.5 million rationalization suggestions, which re-
sulted in a saving of 19.6 billion rubles.l
For improvement of the work in connection with the entire complex of problems -
' pertaining,ia particular, to the field of iavention, great importanc~ attaches
to the CPSU Central Co~ittee and USSR Couacil of Ministers decree of 3.2 July 1979
- on "Improving the pianning and intensifying the influence of the economic mechan-
ism in the matter of enhancing the efficieacy of production and the quality of
the work."2 In 2ccordance with this decree, the new system of planning indicators
is be ing introduced at all the levels of economic operation, In line with a new ~
- statute, the work of every enterprise is evaluated not on the basis of "production
- volume" but on the basis of production of the basic types of output in physical
terms and on the basis of the gro~wth of "net" output. This impels the ministries,
- depaY�tments, entexpr~ses and aseociatioas to step up the efficiency and quality of ~
the work, to make better use of the fixed capital and reserves, and to obtain a
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....~C. 'J1`i'~..)~:~,L ~~3L'~ . .'!~I
more rapid rate of introductioa of the latest achievements of science and tech-
nology in production. There has also been a significant graw~h in the role of
inveation because technical innovations can only be developed on the basis of the -
effectiveness of inventions.
Bec~use of this, the development of inventioa activiCy has been warked L�y an in-
crease in the role of its legal regulatioa, particularly the legal nravisiaa for
� the planaiag aad financing of this activity.
The plaaning of the iavention and rationalizatiaa worl~ must direct the creative -
efforts ~f the inventors and rationalfzers to the accamplishment of rhe
urgent tasks of improving national production. The planning must also provide
_ for expeditious and extensive use of effective inventions and rationalizatioxr
suggestions, for development of the technical creative sk311 of the wor.?cer~ �cicl
- for involvi..+.g s:hem in active work in tbe field of invention and rationali.zation.
The plaaning therefore encompas~es all the aspects of this activit~ ~ r~s~ .~"~=�r,,~, -
the introducKion of the reaults of the iaventioas and rationalization suggesticns
in production, the calculation of the ecoaomic effect of this introduction, the
mas~ organizatioual work in the realm of invention and rationalization, 3nd the
finaaciag of the outiays for this type of activity.
_ After deciding on the introduction of the inventions they have selected, the enter-
_ prises aad organizations incorporate them in their current and lang-term plans,
_ define the responsibility for fulfillment, aad indicate the time limits for fu1-
fillment as well as the procedure for financing and the sources of material ~upply.
- Of special interest is the work of the Leningrad Electric Machine Building As-
sociation Elektrosila, which introduced coatinuous planning of the intr.oduction of
inventions back in the stage af submitting the requisition to the USSR State Com- ~
mittee for Inventions and Discoverias. Concurrently with the formalization of the
requisition th~y draw up the assignment for iatroduction, indicat~ng 3n it the
time limit for the preparation of the technical documentation, manufacture of the
. m~c~ck-up and test model, a~d the starting of industrial production of the in-
veation, "product." Provision is made for the author's surveillance of the
product output obtained as a result of Che invention. Also evolved is a close
creative cooperation between the productioa shops and the deve lopment personnel,
Evidence of the effectiveness of the system of continuous planning is the fact
that during the period of the Nin~h Five-Year Plan the association introduced 3 10
inventions which yielded nearly 7 millioc~ rubles of savings.3
Acting in accordance with the prescribed procedure, the enterprises and organiza-
tions develop and introduce suggestions for inclusian of the inventions which were
incorporated in th~eir plana (dependin& on their importance and noteworthiness) and
also in the state plans for economic and social developm~nt of the USSR and the
_ Union republics. In turn, the miaistries and departments canvey to the USSR State
Committee for Inventions and Discoveries informatioa on the inventions which have
been accepted for introduction intq their system. Jo3ntly with this committee they
prepare and subm~t to ~osplan USSR and the State Co~ittee for Scientific-Techni-
cal Work (GKNT) or to the councils of miaiaters of the Union republics suggestions
for adoptiag the inventiona of a sectorial or inte~~sectorial character which are
of natienal economic importance and incorporating them in the state draft plans
for the eco~amic attd social aevelopment of the US:'~R or the Union republics.
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Tha planning of tlie economic effect of the results of the introduction of in-
ventions and rationa~ization suggesCion~s ie coming to be a part of the overall
plans for incrQasing the effectiveness of the production-management, scientific-
research, or other types of activity of the enterprises and organizations. The
determination of this effect is based on "The Methods of Determining the Economic
Effectiveness of National Economy Use of New Equipment, Inventions and Ration-
alization Suggestions," as approved on 14 February 1977,4 by the GKNT, Gosplan
USSR, th~ ~cademy of Sciences USSR and the USSR State Committee for Inventions
and Discoveries; the determination is also based on the industry regulations
compiled on the basis of these methods. Experience shaws that in the develop-
ment of new ~quipment and technology optimum effect is achieved by the enter-
prises and organizations which have previously planaed and applied the qualita-
tivelq new and progres,sive technical solutions based on the pertinent inventions.
Thus, for example, in the Ministrp of Petroleum-Refining and Petrochemical In-
_ dustry USSR in 1977 six new tec}~nical installations developed on the basis of in-
Wentions produced 15 million rubles of savings for the national economy while 12
other ne~; installations which did not make use of the results of inventions pro-
duced sa.vings of only 20.7 million rubles. In other words, technology based on
= the use of inventions yielded nearly 1.5 as great an e~on.omic effect as the tech-
nology which did not make use of theae reaults.s
A major role in the Zegal regulatinn of inventions is played by the financial
provisions for invention and rationalization work and by effective utilization
of the allotted funds.
- According to the laws now in effect6 the financial outlays of the enterprises,
organizations, institutions, associations, ministries and departments for in-
ventions and rationalization are carried out in accordance with spec~al esti-
mates which are incorporated as an integral component of the yearly industrial
(economic) plans of financing.
The estimates of outlays for inventions and rationalization provide for expendi-
tures for the manufacture and testing of models and patterns and tl:e organization
of production, the payment of awards to the authors of inventions and rationaliza-
tion suggestions, bonuses for assisting in inventions and rationalization, etca
The expenditures incurred by the ministries, departments and A 11-Union and xepub-
lic industrial associ.ations in accordance with the estimates of ouLlays for in-
ventions and rationalization are defrayed from the budgetary appropriatior.s and
the assets of several centralized funds (the fund for putting new equipment into
operation, the co~non fund for the development of science and technology, and the
centralized fund for payment of bonuses for the development and introduction of
new equipment). The enterprises, organizations, institutions and associations
defray the outlays for inventions and rationalization from the assets provided
- by the produc~ion estima.tes (the cost accountiag enterprises and organizations)
or the assets based on the estimates for their maintenance (the organizations and
institutions which are in the state buciget system or are financed by some othPr
method) and also the assets of certain funds which are on hand at the enterprises
and in the organizations and associations (the fund for production development,
the enterprise fund, and the fuad for paymeat of bonuses for the development and
introduction of new equipment). Besides this, the construction orga.nizations can
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- make use of the portion of the savinga left at their disposal from the amount ob-
t~iaed as a result of a reduction in the prices for conetruction without a lessen-
ing of its quality.
_ The outlays conaected with the preparation for int�roduction of invenrions and
rationalization suggestions which are in the sectorial or intersectorlai category
are ma.de from the asaets allotted from the budget aad a]_eo fran the I'EJ.~V3.Tkt
centralized funds of the concerned ministries.
Experience has shown that there is ia many respects no 3ustificaticm for the
separate pZanning and finan~ing in effect until recently for the assignments for
development of scientific-research and planaing and design work and for measures
pertaining to the development and introduction of new technology. As a conse-
quence of this, there has been lacking the necessary relationship between thc:
plaas of the scientific research institutes and the planning and design orgaui-
zations and the enterprises' plans for the development aad introductioii of new
technology. It has also slawed down the rates of practical applicati~ti oz the
results of research aad development, has failed to establish the recipracal re-
sponsibility of the scientific research iastitutes, the design and technological
bureaus, and the enterprises in respect to the development and putting into oper-
ation of new equipment and the introductioa of new tech~ological processes within
the preacribed time limits. Important inveatioas which could further the accel-
eration of scientific-technica~. progress have been put into practice at a very
slow pace or else have not been introduced at all.
All this has demonstrated the need to establish an indissoluble link be ~aeen the
creative process of development of the inver~tion concept and the process of creat-
ing the new technology, thus joining the theoretical aspect of the research with
the "materialization" of the new designs.
This problem was also effectively resolved in the 12 July 1979 decree of the
- CPSU Central Committee and the USSR Co�ancil of Minis*_ers.
To expedite scientific-technical progress and increase the produc.tion of new
highly-effective output, this decree establishes in the ministries and departments
a single science and technology development fund for financing scientific-research
and experimental-design work and for reimbursement for outlays connected with the
development and putting into operation of new types of products and technology
and with the introduction of scientific organization of labor; also for financing
l the outlays for improvement of the quality of the output and providing compen-
sation for the expenses incurred in the first years of production of the new out-
- put. This fund is derived from withholdings from the planned prof it of the
scientific production and production associations (enterprises) on the basis of
the norm established in the five-year plan (with a breakdawn by years) in per-
centages of the "net" (normative) output and in some industries percentages of
the co~odity production. The industrial ministries are authorized to transfer a
portion of the assets in the couanon fuad for development of science and technology.
to the All-Union (republic) industrial associations and large production and
_ scientific production associations.
For the financing of especially important scientific research work requiring con-
siderable out~ays, in addition to the assets of the common fund for the development
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of science and technology, use of asseta from the atate hudget is also author-
ized.
~ It ahould be noted that prior to the isauance of ~he July decree, measures foY
the establishment of a cou~on fund for the deve lopment of science and technology
were implemented on an experimental basis in some industry sectors, particularly
the electrotechnical, heavy, and ele~tric power industries and transport m3chine
building.~ The measures yielded good results.
The object of the planning and financing ia th is field became, not the scientific
research organization, as was the case previously, but the specific theme or
= project.' The planning encompasses all the stages of accomplishment of the -
_ scientific development work (up to the poiat of putting the results into oper- r
= ation). Coordination of the work on each theme is the fimction of the leading
organizativn, which is responsible for fulfillment of the assignmeat. The fi-
nancing of the work is accomplished through this orgaaizatiAn in proportion to .
the actual fulfillment (based on the goods and ~ob orders drawn up for the theme
as a whole). `
The syatem 9f continuous thematic planning on the basis of goods and job orders
and the establishment of a common fund for the development of science and tech-
nology make it possible to concentrate the material, !abor and financial resources
on the most important .iirections of scientific-technical pro~ress, to join the pro-
ceas of development of new technotogy with the creative process of evolving new in-
ventions, and to direct the efforts of the inventors ~n the principal directions
of the development of the industry aad the natloaal economy. At the same time, ~
_ the financing of scientific and technological development frocn a common fund and,
in essence, from the profit of the enterprises strengthens the motivation of the
enterprises for maximum rapidity of the introduction of the scientific results in
production and for shortening the research-deve lopment-production cycle.
_ The following facts can attest to the effectiveness oi: the new system of financ-
ing the development of science and technology: Whereas in 1977 in our country
as a whole the number of inventions introduced with a yearly economic effect of
100,000 rubles and more was only 3 percent of all the inventions introduced, the
electrotechnical industry, which began to employ this system starting back in 1968,
obtained an average yearly economic effect of 100,000 rubles from every invention
introduced. Back in the mid-1970's the time pe riods for the development of new
products in the industry were shortetted to 2/3-1/2 the previous level and the
economic effect from the use of the electrotechaical industry output increased
six-fold.8
As a rule, inventions are intersectorial in character. Nearly every invention (or
rather the princip?e of an invention developed in any industry for some specific
purpose) should also be suitable for use in other induatries for the most dive~se -
purposes. The use of inventio~ts aad the machines, technology dnd consumer goods
developed on the basis of these inventions, not in one but in many production
_ sectors, leads to an increase in the scale of use of the inventions and conse-
quently to a reduction in their production cost.
.
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Evolving as an important legal form of proliferation and introduction of scientific-
' technical achievements has been the contract for the transmission of technical
methods (far a definite payment). This coatract obtained widespread practical use
following the adoption by the USSR Soviet of Ministers of the 27 August 1971 de-
~ creP on "Increasin g the reciprocal ecanomic incentive of the enterprises and or- _
ganizations for the transmission of their scientific-technical achievements and
for the use of the advanced experience bdrrowed."9 In accordance with this decree
the USSR State Committee for Science and Technology on 31 December 1971 approved a
3tandard contract to be used when enterprises and organizations transfer their
scientific-technical achievements to other enterprises and organizatians and render
_ assistance to them in the use of the borrawed advanced experience,l0
, Arising on the basis of this contract were essentially completely new and pre-
viously unknown relationships between the organizations for the transmission of
advanced experience. The experience transmitted by the developer enables the -
" recipient to create new equipment (technology) in shorter time pariads with min- .
imum costs and with a strong likelihood of obtaining the planned economic effect.
Contracts for the transmission of scientific-technical achievements are concluded
in instances when the borrowing party is given technical assistance in putting the
achievements into operation (manufacture and delivery of models, installation and
adjustment of equipment, joint tests, etc.) or when the technical documentation
delivered is bei.ig revised to make it conform to the production conditions of the
borrowing party. 1
~ The subject of this contract is not th~ scientific-technical work itself but only
the models of nEw mach~:;es, the new types of raw material and material, the progres-
~ive techno3ogical processes, and the assistance to be given for putting them into
operation. The content of Che scientific-technical findings to be delivered, the
time limits for their delivery, and tha character, volume and time periods for the
technical assistance are all defined by the parties and specified in the contract. "
The borrowing organizatiou is cou~itted t4 making payments to the other party and _
to achieve maximum effectiveness in using the material delivered to it. The prin-
ciples of compensation for de livered findiags are based on the concept that in our
country any scientific-technical achievement can be freely used by any state
er_terprise and organization. Consequently, the scientific-technical finding it-
self is transmitted without charge; payments are made only for the forms in which
it is transmitted (technical doeumentation, models and assistance given for putting
the new development into operation).
Experience indicates that the greatesr, demand is for findings on the level of in-
ventions safeguarded by authors' certificates within the country and foreign
patents .
Legal regulation of inventions in our country is carried out or~ the basis of the
Statute on D~scoveries, Inventions and Rationalization Suggestions as approved by
- the 21 August 1979 decree of the Council of Ministers USSR.12
It should be emphasized that regulation of the relationships which evolve in the
process of development and introduction of inventions and rationalization
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suggestions is of a comprehensive character because it embraces administrative,
civic, financial, labor and other relationships. C~nsequently, increasing the
effectiveness of the process of development of inventions and introduction of
technical achievements in the national economy requires the working out of a
broad complex of economic, legal aad organizational measures. This cannot be ac- ~
complished in the proper manner on the basis of the normative document now in ef-
fect.
The All-Union scientific and practical conference on "Problems of Improvement of -
the Invention Law and Development of Statutes on Inventions in the USSR," which
conference Was..held on 10-12 March 1980 by the USSR State Co~ittee on Inventions
= and Discoveries, the Institute of State and Iaw of AS USSR, and the Central Coun-
cil of the VOIR [All-Union Society of Inventors and Efficiency ExpertsJ, noted
that the implementation of a large complex of ineasures relating to improvement of
planning, financing and economic motivation in the field of invention can only
be achieved on a higher level of legal regulation--on tt~e leve 1 of law.
The urgency af this matter is indicated by the fact that the 12 July 1979 CPSU
Central Committee and USSR Council of Ministers decree on "Improvement of the -
planning and strengthening of the influence of the econamic mechanism in increas-
- ing production efficiency and work quality" emphasizes the need for d close re-
lationship between the plans of economic and social development of the USSR and -
acceleration c+f the implementation of acientific-technical findings designed for
stepping up the rates of growth of labor producti~vity and output quality. This is
one more proof of the increased role of in~~entions and rationalization suggestions
in our country's economics. -
The need for t.he working out of a law on inventions in the USSR also stems from
the steady expansion of our country's economic and scientific-technical cooper-
ation with foreign socialist countries, most of which carry o ut legal regulation
_ of inventions, not on the level of aormative documents unde.r the law, but on the `
_ level of specific laws.~
FOOTNOTES
_ 1. See VOPROSY IZOBRETATEL'STVA [Problems of Ynventions]," 1978, No 8, p 4. -
2. See PRAVDA, 1979, 29 July.
3. See VOPROSY IZOBRETATEL'STVA, 1977, No 1, pp 10-11.
4. Ibid, 1477, No 7, pp 46-64.
5. Ibid, 1979, No 2, p 5.
6. See SP [Collection of Government Regulations and Decrees], USSR, 1973, No 19,
p 109; VOPROSY IZOBRETATEL'S1'V~y 1979, No 5, pp 51-59.
7. See SP, USSR, 1958, No 18, p 122, 129; No 14, p 98.
_ 8. See VOPROSy IZOBRETATEL'STVA, 1976, No 2, p 45; 1979, No 2, p G, 13.
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9. See SP, U$SR, 1971, No 16, Art. 118.
10. See "Bulletin of Normative Documeats of the Ministries and Depart~nts of
USSR," 19;3, No 4, pp 25-28. -
11. See VOPROSY IZ OBRETATEL'STVA, 1974, No 3, p 15.
12. See SP, USSR, 1973, No 19, Art. 109.
13. See, for example: Law of NRB [Bulgaria] of 8 October 1968 on "Inventions
and Rationalization Suggestions" in the book "La�as of the Socialis4-Coun4r~~s ~
on Invent~;ons," Vol 1, Moscaw, TsNIIPI [Central Scientific Research In~stitute
of Patent Information an3 Technical and Economic Research], 1975, pp E1-7.05;
Law No 2, 1969, VNR [Hungary] on "Pateut Safeguardiag of ~nventions"-~~-Iba.~
pp 5-27; Law of PNR [Polaad] of 19 October 1972 on "Inventions"--Ibid pp 106- -
134; Law of CSSR of 1 November 1972 oa "Discoveries, Inventions and ~.tion-
alization.Suggestions and Industrial Models"--Ibid, Vol 21, pp 128-17~. ~
COPYRIGHT: Izdatel'stvo "Nauka", "Vestnik Akademii nauk SSSR", 1980
7 962
CSO: 1820 h
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= ECONOMIC POLICY, ORGANIZATlON AND MANAGEMENT
_ MANAGEMENT STRIVES TO IMPROVE PRODUCT QUALITY
Moscow VOPROSY EKQNOMIKI in Russian No 12, Dec $0 pp 1.14-124
[Article by A. Glichev: "Orienting_ the Econo.mic Mechanism toward
- Improved Product Quality"] -
[Text] As a source of growth in production effici;:ncy, improved
_ product quality and state-of-the-art create the physical basis
for developing this growth and for satisfying the growing needs -
uf the Soviet people. At the June 1980 CPSU Central Committee
Plenum, L. I. Br~zhnev declared improved production efficiency
and work quality the major goal that should continually be -
~n our sights.
_ Enhanced producC quality contains major reserves for increased
productivity in social labor, conservatio~ of physical, manpower
and energy resources, {mproved return on fixed capital and
accelerated rates of economic development. To uncover these
- reserves, the economic mechanism must be improved so that it _
_ ensures complete product quality control at all levels of the
s~:ience-technology-production cycle.
For a l~ng period of time, the economic mechanism was primarily
oriented on quantitative indicators of production development.
In the CPSU Central Committee Keynote Address to the 25th party
congress, L. I. ~irezhnev emphasized that the entire planning and
management mechanism, the entire system of tangible and intangible
incentives for employees, the efforts of enginee.rs and designers
� and workers skills must be directed toward improving product quality.
Active, creative work in this direction unfolded at the beginning
of the lOth Five-Year Ylan. A large package of ineasures was
introduced to update many components of the economic mechanism
and to orient it toward a solution of the problems of enhanced
product quality and improved production organization and state-of-
the-art. First of all, the planning principles for the ~ob of
_ improving product quality were strengthened. For the first Cime
in production planning, economic and social development plans for
= sectors, union republics, enterprises and associations included
targets to increase product3.on of top-quality products,
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- The state standardization system was directed toward solving *_he
problems of improved product quality to a greater degree. There
wgs an increase in the scope of applications for standards. Moreover,
primary attention w as directed at increasing the scientific and
- en gineering level of standard~ documents and toward timely implemen-
ta~ion of and strict campliance with the requirements in the docu-
ments. Over 9,000 State Standards were updated :ind revised. The
- newly developed and revised standards include mor~~ and more pro-
gressive requirements and indicators. At present~ the technical
standard base being used consists of approxi~ately 23,000 ~tate.
Standards, over 35,000 Sector Standards, 7,000 Rep~rblic Standards
an d almost 132,000 specificat3ons.
- Systems of standards, such as the Uniform Process Production Seeup
System, the Uniform New Product Production Supply System, the
- Uniform Measurements System and others~ were developed and success-
- fully implemented. There was a simultaneous introduction of new
product standar~s and prices. This procedure made it possible to
tie the enterprise economic incentive system in with the targets to
- improv~ product quality and state-of-the-art. The establishment of
economic penalties for producing products which deviate from the
� requirements of the standards has improved the practice of intro-
- ducin g standards and compliance with them. The number of unimple-
mented state standards was reduced by almost a factor of two.
The product certification system has become an effective component
of the economic mechanism. The inclusion in the USSR state economic
and social development plans (beginning with the lOth Five-Year
Plan) of t~rgets to increase production of top-quality products
and of targets to certify newly developed products has made the
planning of improved quality more concrete. There was an expansion
of socialist competition by groups at enterprises, in regions and
union republics to increase the production of products with the
geal of Quality. Based on its economic scope, certification has
- been transformed into an important tool of production planning and
of evaluating the contributions of enterprises to national income
growth.
The job done by industry tu im~rove product quality and to consolidate
the organizational principles and methods for this ~ob has had a
large impact in accelerating producCion growth rates for highly
efficient products. For example, on 1 October 1980, the State
Seal of Quality was awarded to more than 85,000 items. This exceeds
- the number of such good~ at the beginning of the current five-year
_ plan by a factor of three. In the 4 1/2 years of the lOth Five-Year
Plan, the percentage of top-quality products in the total volume of
commodity (gross) output increased for industry as a whole from
6.5 to 15.2 and, for machine building ministry products, from 18.5
to 32.6. By the end of the five-year plan, it is anticipated that
the percentage will reach 16-17 for industry. The production of
highly efficient products stablizes the economic links in the
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"supplier-consumer" chain and it is important to conEider this when
organizing product quality control.
Significant changes are taking pla,ce in th.~e management machinery
at enterprise, individual sector and inter-sector levels due to
the widespread introduction of product quality control systems.
In August 1975, the CPSU Central Committee approved the experience
_ of party organizations atcd co?lectives at leading industrial
enterprises in L'vovskaya Oblast in their development and imple-
mentation af an integrated product qualty control system (TPQCS).
Based on a synthesis of the experience gafned by using IPQCS at
enterprises in L'vovskaya, Saratovskaya, Yaroslavskaya and other
- oblasts, the State Standard Commissinn (Gosstandart),in conjunction
with the USSR State Co~mittee for Science and Technology (SCST)
and the State Planning Commission (Gosplan), developed and approved
the "Basic Principles for the Uniform StaCe Product Quality Control
System (USPQCS)." They formulated ways to achieve the main goal
of a product quality control s.ystem, systematized the special funcr
tions �or improved quality of process control and e5tablished the
system's heirarchy and dev~lopmental stages. It was clearly
indicated that the technical and organizational bases for the
~ USPQCS are the national economic planning system and the state
standardization system. The "Basic Principles" are recommended
to ministries and departments, union republic Councils of Ministers,
associations and enterprises, research institutes, planning and
design organizations in their 3ob of using scientific, technological,
industrial and socio-economic factors to ensure high, stable rates
of improved quality in all types of producCs.
Product quality control systems are developed in a systematic manner
based on the scientific methods of planning large systems of economic
organizations. With the participation of employees fnam industry
in 1976-1'977, Gosstandart and its leading institute, the National
- Standardization Research Institute (NSRI), developed a series of
recommendations on scientific methods to establish and introduce
- integrated product quality control systems at enterprises. Based
on these recommendations, sectors developed documents establishing
the methods for organizing the ~ob of product quality control con-
~ sidering the industry's specific products, specialization and
affiliation. During the same period, Gosstandart and its institutes
and local agencies widely publieized the experience of leading
enterprises and associations in developing and implementing IPQCS's.
= Over 12,000 industrial enterprises filed documents on the implemen-
tation of IPQCS's.
- As a management subsystem, the IPQCS has a clearly defined goal--
continually improving product quality and enhancing production
- efficiency on this basis. An important place in this subsystem
is occupipd by the evaluation of subdivisi~ons'~ economic performance
and the work of each employee by considering qualitative indicators
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(the percentage of products accepted at the first presentation, the
~ob performance factor for executines and others). W3thin the
IP(~CS at the enterprise level, there is an inherent unification of
- components of the economic mechanism, such. as the improved product
quality plan, standardizatfon and economic incentives.
Dozens and hundreds of specialists and workers participate in Che
- establishment of an IPQCS at each enterprise. While developing
the enterprise standards, th~y include in them progressive
methods for improving product quality by considering adv~nced
techniques. Now that a large amount of experience has been
gained, it can be said that this wid~ly developed job is
a unique form inthe evolution of democratic principles in
- socialist production management and a means of increasing the
_ creative performance of work groups.
The organizational, economic and aocial steps taken by enterprises
which have implemented an IPQCS have promoted a significant increase
in the output of top-quality p roducts, reduced l~ses due to rejects,
reduced the number of complaints and decreased new product develop-
ment time. For example~ at Dnepropetrovsk's K. Ye. Voroshilov
_ Combine Plant, which implemented an IPQCS in 1978, the percentage
of top-quality products reached 45.1. and losses due to rejecCs
declined to 0.16 percent of groas production costs. The percentage
of top-quality products at enterprises which have implemented an
IPQCS is 1.5-2 times higher than the average for the corresponding
region or sector. For example, at Georgian SSR enterprises which
have implementQd an IPQCS, the percentage of top-quality products
was 33 while the total for the republic wss 18.7; in the Latvian
SSR, the corresponding figures wer~ 35~.and 18.8 percent.
With the large-scale -~mplementation of an IPQCS, there has been a
significant increase in production efficiency not only for individual
enterprises but for regions and sectors as a whole. For example,
in the three union republics which have implemented IPQCS's most
aggressively, the percentage of top-qualit.y products has increased:
from 12.6 percent in 1976 to 22.8 percent in 1979 in the Belorussian
SSR; from 9.7 percent to 18.8 percent, respectively, in the Latvian
SSR; and from 8.8 percent to 17.3 percent in the Lithuanian SSR.
As shown by an NSRI analysis, the IPQCS promotes an increase in
industrial discipline. The average number of standards and specifica-
' tions violations at a single enterprise which had implemented an
IPQCS decl:tned by a factor of 1.5-3.5.
During the lOth Five-Year Plan (according to a preliminary estimate),
individual ministries whose products have a significant effect on
rates of technological progress achieved a high percentage of top-
quality product production: the Ministry of the Electronics Equipment
Industry (45.1 per:cent), the Ministry of the Petroleum Equipment
Industry (35.3 per~:ent), the Ministry of the Automobile Industry
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(37.6 percent)~ the Ministry of the Instrument Tndustry (32.7
. percent), the Ministry of the Machine Too1 Industry (32.8 percent)
- and the Ministry of the Chemical Machiner~ Industry (30.0 percent).
~ Compared to the others, these ministries have fewer non-certified
products. For a number of the most important product types, the
_ share of top-quality produc~s is continually ~;rowing. For example,
during the lOth Five-Year Plans the productior~; of top-quality
' power transformers increased from 40.8 percent to 53.2 percent;
top-quality metal-cutting machine tools increased from 19.2 to
44.2 percent; and top-quality forge-and-press ~nachines increased
f?-om 16.3 to 39.7 percent.
Enterprise-level product quality control does not by any means
solve all the problems of improving product quality and state-of-
the-art. In-depth industrial sector specialization splits the
product development and manufacturing process; moreover, i.ndividual
elements and levels are dispersed and it is more difficult to
- coordinate them in time. It is difficult to achieve engineering,
standards and day-to-day coordir.ation, which results in larger
_ gaps between new product development periods at research institutes
and design bureaus and productian of top-quality products at
enterprises and in broken deadlines for coordinated raw materials,
materials and component deliveries. A lack of current or minimum.
inventories in these cases leads to irregular enterprise operations
and, as a result, poor product quality. These and other reasons
objectively necessitated a solution to the problems of product quality ~
control at higher management levels.
- D uring the lOth Five-Year Plan, the first practical steps were taken
_ to coordinate sector and territorial product quality improvement
planning methods. This work took the form of "Five-year p'lans of
q ualitya" Based on recommendations from the NSRI, such five-year
plans were drawn up and successfully implemented at enterprises
in Moscow, Minsk, Kiev and Novosibirsk a~nd in Moskovskaya, Kostromskaya,
L'vovskaya, Odesskaya and other oblasts. A number of ministries
achieved a great deal of success in improving work organization to
improve product quality at the sector level. The Ministry of
the Electronics Equipment Industry, the Ministry of the Instrument
Industry, the Ministry of the Machine Tool Industry, the Ministry
of Light Industry, the Ministry of Agricultural Machinery and
others are developing and successfully implementing sector product
quality control systems (SPQCS). Sector product quality control
systems are presently being developed by 22 union ministries. The
sector systems not only ensure implementation of the IPQCS at all
enterprises but also solve the quality improvement problems that -
- enterprises cannot take ~.n themselves.
� An important stage will be the development of republic product
q uality control systems (RPQCS), which will make it possible to
integrate sector and territorial quality control on the union
republic scale. Such systems are being developed in the Latvian SSR,
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the Armenian SSR and the Belorusaian SSR. The most complete RPQCS
is being implemented in Latvia. As a result of the introduction ~f
the first pha~e of the republic system in the Armenian ~SR, th~re
w as a significant increase in the production of top-quality
_ products, which was 15.6 percent on 1 June 1980. The republic
- e xceeded the country's average for this ind.icator.
- A number of industrial centers are devetoping city product quality
control systems. A city industrial product quality control system
_ developmental program is being implemented in Moscow. Guidance
on scientific methods for this job is being provided by Gosstar_dart,
its research institutes, the Moacow City Planning Agency and other
city organizations.
~ At the city level, they are developing and implementing long-term
and current product quality and state-of-the-art improvement
plans and programs, mobilizing work groups Co fulfill and over-
fulfill these plans, synthesizing and disseminating advanced
q uality control techniques and developing socialist competition to
achieve high item quality. The primary quality control operating
_ agencies at this level are: the city planning commission, Gosstandart's
Moscow Standardization andPrecision Measurement Center and the
statistics administration. The entire job is being directed and
supervised by the Public Council on Industrial Product Quality
Improvement of the Mos~cow City Party Committee [MGR~ of the CPSU.
To increase the coordination of enterprises and city organizations
in finished product quality improvement, creative cooperation is
expanding among collectives at industrial enterprises and research
_ organizations and development organizations. The cooperation is
developing based on a slogan which appeared in the city: "An
Assurance of Quality--From Design to Finished Product." The
organizations malce contracts on cc~operation, develop joint docu-
ments on standards and provide mutual assistance and supervisi:on
~ during all stages of product development. All of this ensures
high quality in design formulation and in the manufacture of se~ries
products and iic ensures skilled maintenance. Creative cooperation
_ is successfully developing among many enterprises and associations
on the foundation set by a number of enterprises, including Moscow's
Automatic Transfer Line Plant dedicated Co the SOth anniversary of
the USSR, the A. I. Yefremov Red Proletariat Machine-Tool Plant,
- the Sergo Ordzhonikidze Machine-T~ol Plant and others. A beginning
has been made toward setting up creative cooperation among the
collectives at the ATE-1 [Moscow Automobile and Tractor Electrical
Equipment Plant], Compressor and Pressure Gauge plants, the
Zarya and Bolshevik associations and others.
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In the city's rayons, quality control is ensured by developing
and implementing rayon product quality control systems which consist
of integrated rayon plans b a~ed on ente.rprise quality improvement
plans. This work is directed and coor3in ated by the CPSU Rayon
Committ?e's Psblic Councils on ~ua~.ity. The plans are drawn up
using the ~xperience gained by ma~or, leading enterprises and
associations and by developing an environment for mutual
assistance to improve proceduresy work and production organization,
production management and personnel training. Universities of
quality have been set up in the rayons. Such universities began
to operate for the first time in Moscow's Oktyabr'skiy and
Krasnopresnenskiy rayons. The rayons and the Moscow City Planning
Agency are developing product quality improvement pl.ans for 1981 and:.
for the llth Five-Year Plan.
The large amount of work done to orient the economic mecha~iism
toward improved product quality has already made it possible during
the lOth Five-Year Plan to significantly improve the quality of
many product types, to reduce the gap between quality growth
rates and requirements and to expand the introduction of integrated
product quality control methods at all levels of the national
_ economy. However, in spite of thP work that has been done, there
are still shortcomings whose cc:reczion will accelerate the rates
of improved product quality and state-of-the-art.
Products with the State Seal of Quality are being produced by
approximately 10,000 enterprises, i.e., less than 30 percent of
_ all industrial enterprises. Compared to 1975, 1978 saw a decline
in the percentage of top-quality process equipment for the textile
and leather shoe industries, of top-quality tracked cranes and of
top-quality excavating machines. Many machines and household
appliances frequently break down due to their unreliability.
In a number of cases, certification of products is insufficiently
objective and there is a decline in requirements levied on certified
items. As a result, articles of low state-of-the-art and quality
are being submitted for State Seal of Quality certification. This
is why Gosstandart refused to register 370 decisions of state
certification commissions during the first quarter of 1980 and
170 articles were stripped of the hon @rary pentagon. Certain
sectors still have a high percentage of products which have not
undergone certification. Far example, over 30 percent of total
commodity output at enterprises of the Ministry of Agricultural
Machinery and almost 40 percent at enterprises of the Ministry of
Heavy Machinery have not been certified.
The proper job is not always being done to implement and comply with
standards. For the national economy as a whole, 260 State Standards
were not implemented, standards which set the state-of-the-art and
quality for petroleum derivatives, industrial rubber articles,
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precision slloys and certain t~rpes of machines, equipment and
machinery. Over 10 percent of the total amount of coal delivEred
to consumers does not meet the requirements of state stand~rds
for ash content, moisture content and fines content. As a result~
there is .~n increase in fuel use, millions of tons of rock aY~e
transported and materials handling costs are incr2asing.
Pursuant ta the decisions of the 25th CPST1 Congress, industrial
ministries are developing integrated a*andazdization programs
for the most important product types with guidance on scientific
methods from Gosstandart. At present, 142 programs are
being implemer~ted. Among them are "Metal-cutting Machine Tools,"
"Tractors," "Shoes," "Fabric" and others. The transition to the
program method is of fundamental importance in organizing the
job of improving quality on a large scale~ It makes it possible to
more accurately define the goal of improved q~uality and to balance
the essential properties of finished products with the quality of
raw materials, materials and. components. Departmental independence
i~ being overcome and the level of industrial integration is
~ increasing. ~However, in order to widely disseminate this method,
it is necessary to solve many methodoingical problems. It is well
known, for example, that there are methodological and practical
problems in balancing the quantitative indicators when the materials
b alance slleet is compiled. These problems increase greatly when
working on a balance for~indicators of quality and are even greater
for indicators of quantity and quality.
Large opportunities to more completely and broadly orient the economic
mechanism toward improved product quality are appearing with the
implementat~on of the CPSU Central Committee and USSR Counc3l
_ of Ministers decree "On Improving Planning and Increasing the
Effect of the Economic Mechanism to Improve Production Efficiency
and Job Performance." Many product quality control problems are
now being solved at the intersector level. It has been established
that the m3nistry which is the leader in producing a specific
product is responsible for meeting the requirements of the national
economy and the people for the required mix and quality of the
- product. Procedures have been established for supplier and consumer
. coordination and this raises many problems of organization and
methods for the leading ministries, problems which include developing
and implementing methods to accurately determine the pattern of
demand. It should be noted that the methods for analyzing, or rather,
- determi~ing the planned pattern hane not been completely worked out
yet. The correction of shortcomings in this area will make it possible
to significantly improve planning for enhanced product quality.
To ensure a stable growth rate for product quality, a new, important
procedure is being introduced in pla?~ning. A top-quality product
growth indieator (or other equivalent indicator for a spec3.fic sector) ,
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- broken down by years, will be approved.for industrial ministries~
associations and enterprises. There will be changes to the
syatem of real product measures, changes which arill mor~ completely
- and accurately reflect the product's national economic efficiencq,
state-of-the-art and other essential pr.nperties. ~or consumer
goods, provisions have been made to plan the production of products
in real terms far. a multiple mix, including childre~'s goods.
The plans fQr new technology will be more closely coordinated with
improved product quality planning. Basic targets are being set to
- introduce and produce new, highly efficient products, including
at newly commissioned enterprises. It is ~~so imp~rtant that -
= improved product quality will be planned by taking into account
- the long-term development of social production and enhanced material
- and cultural standards of living. Provisions have been made to
sup~,lement the system of plan indiaators and measures for i~mproved
product quality with systematic measures to develop, produce and
introduce new, highly efficient articles, materials~ machinery and
equipment and with systematic measures to improve th~ quality of
the products produced. This job has been assigned to m3nistries
and departments and to the union republic Councils of Ministers.
The establishment of precise parameters for improved product quality
and accurate planning of them are, to a s~gnificant extent, new
goals whose accomplishment is complicated by the fact tb.at the
economic, engineering and social nature of quality is dynamic. -
It is necessary to develop scientific quality measurements and
evaluation methods based on qualitative analysis and it is necessary
to develop areas of improvement in organizational forms and methods
for this ~ob both at the enterprise and organization level and for
sectors and industries as a whole. -
As already noted, in practice, unob,jective evaluations of product
quality and state-of-the-art are frequently encountered. Product
developers and manufacturers are inclined to inflate their evalua-
_ tions and consumers are inclined to deflate theirs. To overcome -
this subjectivism, a number of steps must be taken. Speci�ically,
it is necessary, in our opinion,. to establish clear-cut procedures ~
and deadlines for conducting non-departmental examinations of
the economic and engineering indicators for especially important
types of products under development. The non-departmental examination
will be conducted both during the request for proposa]. stage and
during operational use when it ~ill be possible ta actually
evaluate the ultimate results of improved quality. The establishment
of these procedures preceeded the 1979-1980 evaluation of the
state-of-the-art for machinery, equipment and other producer goods.
_ Based on the data obtained, plans called for developing and taking
steps to improve the engineering and economic performance of articles
being manufactured and those recentl�y put into production and to
take obsolescent products out of production. Plans also call for con-
ducting an evaluation of the ~tate-of-the-art for articles periodically
in the future.
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Ministries must improve the work of state certification committees
and introduce scientifically.based product quality evaluation
methods on a wider basis. Extremely promising for the ce.rtification
committees is further specialization and the establishment of
perman ent committees by product types; tl~is will facilitate
the committees' increased responsibilitq for their decisions.
- State certification committees have to evaluate product quality
and obsolescence. A mechanism should be developed that will make
it possible te set deadlines for putting new products into production
and fo r taking obsolescent articles out of producCion based on
certifi~ation results.
Gosstandart agencies have been instructed to raise quali.ty rec~uire-
ments for standards being developed, ensure efficient review
of them and improve supervision over compliance with product
certification requirements and certified product quality. For
violations of these requirements,. provisions have been made for
takin g awa~ the State Seal of Quality and for reducing economic
incentive fund write-offs by the amount of mark-ups (to product
prices) transferred to the funds since the beginning of the yea~
in which the violations are discovered. This procedure covers -
all producCs for which incentive allowances have.been set.
In all activities to improve product quality, a large role is
allocated to testing; the match between actual quality and plan
. targets is established based on test results and man3gement
actions are developed in the event of deviations. Because of
this, ministries and departments~in conjunction with Gosstandart,
- must a uthorize leading organizations for state testing of the
most important types of producers goods, recreational goods and
household produ~=ts. Gosszandart has been assigned to provide
guidance on state product testing methods and supervision over
prope r conduct of them. Regulations on leading organizations for
state testing have been implemented. Essentially, a process is
underw ay for establishing an orderly, well-organiz~ed system for
checking the quality of newly developed and old products. This
will make it possible to k~ep from putting products into production
or fro m producing products which do not meet the modern standards
set by the national economy and the people.
A significdnt role in additional improve~ents to the economic
mechanism is allocated to standardization. In conjuntion with -
- ministries and departments, Gosstandart has been instructed to
revise obsolescent machinery and equipment standards during 1979-
1981. Along with other qualitative characteristics, the new
standards will include requirements for a decrease in the weight
of articles, a reduction in fuel and energy used during operational -
use and standardization of parts, units and instruments.
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Ministries, departments, Gosstandart and its research institutes -
will have to do a lot of work in a short period of time; they will
have to review approximately 2,500 State Standards, numerous
_ Sector Standards, Republic Standards and specifications. These
standards must include graduated quality indicators, optimal
reliability, productivity and ~ervice life indicators and minimum
materials and energy consumption ir~dicators. The standards must
aggressively stimulate enhanced pro~uction organization and
engineerirg and product quality growth. Gosstandart will have to -
increase its methods guidance on standardization for leading -
and basic organizations in various sectors and also increase its
requirements on draft standards submitted by ministries and
departments for review and approval.
To accomplish the goals cn improved planning and up-dating the -
economic mechanism set by the CPSU Central Committee and USSR
Council of Ministers decree, a special place is earmarked for
integrated standardization. This is an important means of
directing resources toward national targeted programs. At
the beginning of the lOth Five-Year P].a:~, as noted above,
142 integrated standardizstion programs were being implemented, -
programs which encompass all the basic types of industrial pro-
ducts. Integrated standardization oiill have to unify the work
being done in various sectors to solve ma~or national economic ~
problems, such as developing the country's fuel and energy base,
machine huilding, instr.ument manufacturing, the agro-industrial
system, territorial-industrial systems and the national economy's
infrastructure.
Standardization resources are widely used to intensify production
specialization. A production standardization specialization
program will have to be developed for a~ticles with overall
machine building applications and for articles with similar purposes;
major, intersector systems of standards for engineering and economic
data classification and coding, environmental protection, safety
procedures and for solving other major socio-economic problems
will have to be developed.
The integration of plan indicators and economic levers makes it
possible to develop a better environment for aggressive action by
associations and enterprises in using all th eir reserves to pro-
- duce highly efficient articles. The decree sets forth a package
of ineasures to increase the role of economic levers and incentives
in product quality improvement. Moreover, industrial association =
and enterprise managerial performance and economic incentives will
be evaluated by considering fulfillment of the producer. and consumer
goods product delivery plan and the product quality improvement plan. -
Beginning with the llth Five-Year Plan, associations (enterprises) -
will have increased economic incentive fund formation standards for
a significant increa5e in the output of new, highly efficient pro-
ducers goods and new consumers goods. The size of the economic
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incentive fund is set ~.n direct relationship to the pxofit obtained
from an increasz in production of top-quality products.
In establishing ~he prerequisites for production of articles with
a high state-of-the-art and quality~ a large role is played by
collectives at research, design and planning organizations where
the future product's state-oi-the-art is laid and high rates of
updating and upgrading it are set. A loC that is new has appeared
in the management methods of these organizations with the formation
of a uniform ~cientific and technological development fund at
ministries and departments. This fund is designed to finance
the w ork and to recover new product development and acceptance
costs, the additional cost for improving product quality and the
increased cost during initial years of production. At machine
- building associations, enterprises and organizations, one-time
bonuses are being introduced as incentives for managers and
employees who directly participate in the development and
acceptance of especially important and efficient types of equipment
and machinery.
Prices are an effective tool in the economic mechanism. However,
in many cases, establshed wholesale prices for pxoducts do not
stimulate output. For example, the total additional profit from
the sale of products ~aith the State Seal. of Quality as a percentage
o~` total profits ranged, for example, from 1.3 to 2.4 percent for
the machine b uilding ministries during 1975-1978. As a result,
. it is economically more advantageous for associations and
enterprises to produce highly profitable items with lower quality
than to develop new product types. To correct these.;.shortcomings
and to est~blish an environment which will economically stimulate
the output of high-quality products, incentive mark-ups to wholesale
prices are being set for new, highly efficient producers goods
whose parameters meet those of the best domestic and foreign models.
- In approving prices, it is important to correctly set the mark-up
by considering the economic impact within the established range--
from 0.5 to 12~5 of the profit standard--accepted for pricing the
specific product or a similar one.
Improvement in the economic mechanism is directed at developing
consumer goods production, exp~nding the mix, updating articles and
systematically improving their quality. At the October 1980 CPSU
Central Committee Plenumy L. I. ~rezhnev said that an increase in
the people's well-being is.unthinkable without increased efficiency
_ in the economic system and intensification of all social production
and the basic trends must ensure significant movement in this
direction during the llth Five-Year Plan. In addition to the general
product quality improvement measures in the CPSU Central Committee
and USSR Council of Ministers decree on improved planning, there
were also special measures for consumer goods. 2here is a significant
increase in~ the role af the USSR Ministry of Trade which will be the
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_ primary customer for cousumer goods. The practice of concluding
five-year co~tracts between the USSR Ministry of Trade's main
administrations and industrial associations is being implemented.
These contracts must have provisions for updating the mix, improving
trim and appearance of articles, commodity packaging and other
manufacturer cammitments which will ensure better satisfaction
of demand.
To increase the production of high-quality consumer goods, it is
important to find out the consumer's opinion of them quickl.y and
accurately and to realistically evaluate the quality. Industrial
ministries wi11 have to develop a network of coffipany stores to
sell the consumer goods produced by their subordinate associatior.s
- and enterprises. Leading industrial ministries which produce
- recreational, household and domestic goods must enter wholesale
markets as general suppliers of goods produced by all their
associat;ions and enterprises. All these steps are directed
_ at developing feedback within the product quality control
systems and they undoubtedly will increase the reaction time
of associatio~ns and enterprises to changes in demand for their
products.
Consumer goods pricing is also being improved. Wholesale prices
for the first test batches of goods and for aspecially fashionable
items and also commercial discounts wi:ll be set according to
the quality of the essential p~pperties of the goods being supplied.
When the State Seal of Quality is awarded to new consumer goods,
- the temporary wholesale prices aet for them are maintained for
- the entire effective period of the Seal of Quality. When there
is significant i~uprovement in the quality of consumer goods and
~ when they are awarded the Seal of Quality, associations and
enterprises will increase their deduct-ions for the economic
incentive fund. The economic incentive sqstem must increase the
manufactur.er's responsibility for product quality. Therefore,
when the terms of the contract are broken for consumer goods and
children's items, the size of the fine levied for short deliveries
is increased compared to other goods.
In the near future,.among the Zarge group of ineasures to improve
the economic mechanism, a number of steps should be taken to
increase product quality and state-of-the-art, including:
by the:middle of the llth Five-Year Plan, set up IPQCS's at a11
industrial enterprises and design organizations and, by the end of the
five-year plan, set up sector systems;
expand the developmental work on republic product quality control
sys.tems;
begin development of quality control systems in transportation,
agriculture and construction;
graudally combine all the systems into a Uniform Nat~onal
Quality Control System;
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c~nduct systematic training of personnel in advanced work _
- nethods to improve product q.uality and state-of-the-art.
Additional improvement in tfie economic mechanism will create th~
- necessary organizational and economic environment for total,
comprehensive implementation of the "Basic Pr.inciples for a
Unifor~ National Product Quality Control System" and thereby
ensure an i~~roved stat.e-of-the-art and quality for all types -
of products and open new opport.unities for accelerating quality
growth ~ates. ~
_ RECOMMENDED READING LIST
- 1. CPSU Central Committee and USSR Council o� Ministers Decree
"On Improving Planning and Increasing the Effect of the
Economic Mechanism to Improve Production Efficiency and Job
Performance." Politizdat, 1979. ~
= 2, "25 th CPSU Congres s Proceedings," Politizdat, 1976.
3. L. I. Brezhnev, November, 1979 CPSU Central Committee Plenum
Remarks, PRAVDA, 28 November 1979.
4. L. I. Brezhnev, June 1980 CPSU Central Committee Plenum Report,
PRAVDA, 24 June 19 80 .
= 5. L. I. Brezhnev, Octob er 1980 CPSU Central Committee Plenum
Speech, PRAVDA, 22 October 1980. ~
6. V. V. Boytsov, ed., "Standart-effiktivnost'-kachestvo"
(Standards--Efficiency--Quality), Izdatel'stvo standartov,
1978. _
7. Problems of Equipment Quality Contro]" (Roundtable
Discussion), VOPROSY EKONOMIKI, No 3, 1978. -
8. A. V. Glichev, M. I. Kruglov, I. D. Kryzhanovskiy and
0. G, Lositskiy. "Upravleniye kachestvom produktsii~ Opyt,
~ prob lemy, perspektivy," (Product Quality Control: Experience,
Problems, Prospects), Izdatel'stvo "Ekonomiki", 1979.
COPYRIGHT: Izdatel'stvo "Pravda", "Voprosy ekonomiki", 1980.
- 9001
CSO: 1820
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- PLANNING AND PLAN IMPLEMENTATION
PROGRAIrII~ED MEASURES TO IMPROVE ECONOMIC MANAGEMENT CITED
Moscow VOPROSY EKONOMIKI in Russian No 10, Oct 80 pp 124-135
[Article by V. Ivanchenko: "Improvement of the Planned Management of the ~
Economic System"]
[Excerpt j The decree "On the Further Improvement of the Economic Mechanism and on
_ the Tasks of the Party and State Organs" which was adopted by the CPSU Central
_ Committee in July 1979 and the decree of the CPSU Central Committee and the USSR
Council of Ministers "On Iffiproving Planning and Strengthening the Influence of the
Economic Mechanism on Increasing Production Efficiency and Work Quality" were
- important landmarks in the Party's multifaceted work toward improvement of the
planned management of the socialist economic spstem. The CPSU Central Committee
decree points out that the enormous achievements in the USSR's economic and social
development in the course of the consistent implementation of the scientifically
grounded party policy after the October (1964) Plenum of the CPSU Central Committee
convincingly demonstrate the advantages of the socialist planned economy and the
creative and constructive powers of Soviet society. At the same time, the decree
emphasizes that our economic system has now attained a level of development where
further improvement of the management of the national economy becomes especially
urgent. ~
The CPSU Central Co~ittee attaches paramount importance to further enhancing the
role of the s tate plan--and of the five-year plan in particular--as a crucial
instrument for implementing the economic policy of the Party, to insuring balanced
plans and to orienting the plans more strongly toward solution of social problems.
At the same time, the decree set tfie task to strengthen the effectivenesa of the
economic levers and stimuli and to make the economic incentives directly dependent ~
on work efficiency and quality, on the fulfillment of the plan quotas and on the
results of the production work.
The plan, the economic levers and stimuli, the development of creative initiative
and the socialist competition of. the collectives under new conditions must form a
unified, organically coordinated system of management and economic operation--a
system insuring dynamic development and improvement of the efficiency of social
production and the attainment of the main ob3ective of socialist production:
further growth of the material well-being of the Soviet people.
Addressing the June (1980) Plenum of the CPSU Central Committee, L. I. Brezhnev '
- observed: "We have set ourselves a fundamental task, namely to improve production
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efficiency and work quality. We muat at all tiaaes be mindful of this task. It is
necessary further to think of ways of accelerating scientific-technological prog-
- ress, strengthening work and public discipline and insuring positive increases ~n
labor productivity."
- The system of ineasures stipulated by the decree aims above all at raisin~ the level
of the entire planning work in industry, in the construction sector and in the
national economy as a whole. The improvement of work in the construction sector
and of the efficiency of capital investments involves fuller utilization of the
established production potential in every sector. Great importance is attached to
- the development of cost accounting, to enhanciug tfie role of econamic levers and
stimuli in the acceleration of scientific-technological progress, to more fully
meeting public demand for high-quality goode, while improving overall production
_ efficiency.
As the socialist economic system develops, economic planning improves. T1ie broader
the scope of the economic system, the more complex the tasks conc'rr.in~ ma~~~f;ern~.n*
of the national economy and of the concrete relationships regarding production
economics.
The economic system of mature socialism as a unified national economic complex,
which comprises a11 elements of social production, distribution and exchange as
well as foreign economic relations, ob~ectively calls for adequate, more fully
develope d forms and methods of planning and management. The strengthening of the
influence of the economic mechanism on the scientific-technological, economic and
other processes of the large-scale nation~l econo~ic complex is based on the
system's key element--national economic planning, in which good organization--
inherent to socialism--is realized as the general mode of movement of the socialist
economic system. Of great importance in this process are the changes produced by
the intensification of the social division of labor, by the development of produc-
tion concentration and specialization on the basis of systematic establishment of
large-scale associations--production, scientific production and industrial
associations. In the primary section of management, the associations radically
change the character of the enterprise; they extend its possibilities regarding
planning, production retooling, production specialization, establishment of direct
_ operational links with the suppliers of materials and the big commodity buyers,
devel.opment of cost-accounting relations and implementation of the economic
stracegy within the limits of the five-year plan quotas. In such associations,
_ the whole complex of problems concerning the social development of collec~ives is
~ solved at a new level and worker participation in production control is extended.
Under the new conditions, of special significance in planned management is famili-
arity with the long-range perspectives of the scientific-technological, demographic,
- economic and social processes. The present elaboration of a sqstem of long-range
and current plans--the central element and core of which is the five-year plan--on
the one hand enhances the role of the state plans and on the other hand creates the
: conditions necessary for the further development of the economic initiative and
- creativity of the collectives, associations and enterprises in the implementation
of the economic strategy an d in the practical solution of the problems concerning
reorganization of the production sector in the interest of the consumer.
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The plan system organically comprises a complex program for scientific-technological
progress over 20 years (in accordance wtth five-year periods), the basic directions
concerning the USSR's economic and social development (in accordance with five-year
periods), five-year plans for economic and social development stipulating annual
quotas, and annual plans as a way of implementing the targets of the five-year plan.
The system denotes their continuous interconnection, the unity of the targets, as
one plan ensues from another, continuing and concretizing it. In the development
of long-te rm perspectives, science, scientific prognoses and the detailed study of
basic prob lems assume great importance. This is demonstrated by the development of
the complex program for scientific-technological progress up to the year 2000,
which has for the first time been implemented by the USSR Academy of Sciences, the
USSR State Committee for Science and Technology and the US~SR State Committee for
Construction Affairs with the assistance of the USSR State Planning Commission. On
the basis of the data of the complex program, it is possible to improve the scien-
_ tific subs tantiation of the Basic Trends of the coimtry's economic and social
development up to 1990 and of the llth Fiv~e-Year Plan.
The Methodological Directives--confirmed by the USSR Gosplan Decree of 31 March
1980--conce rning the elaboration of the state plans for economic and social
developmen t of the USSR implement the methodological operating principle~ of the
system of coordinated plans in conformity with the arrangement established by the
July Decree of the CPSU Central Co~?ittee and the USSR Cotm cil of Ministers. The
Methodolog ical Directives are interconnected with the complex of normative docu-
ments deve 1 oped in the course of implementation of the statutes and requirements of
the aforementioned decree.3
' Under Che new conditions, what is required of the five -year plan? The plan must
solve the p roblems concerning the structure, proportions, balance and concentration
" of resource s so as to carry our the most important national-economic tasks and to
implement the specific complex national-economic programs, the complex NTP [Science
and Techno logy Programs], and the programs for the overall development of the
republics, TPK [Regional Production Compleaoes], and large cities.
- The five-year plan (compris ing annual qu~tas) is the basic form of implementing the
strategic tasks and ob~ectives of the Party's economic policy that are laid down in
the long-te rm plans. Exper~ence has shown that within the framework of the five-
year plan one can adequately examine--in the process of their implementation--the
concrete te chnical-economic plan parameters and the production relations that make
it possible to use the five-year plan as an operational program for economic
ma.nagement in all parts of sectorial and regional admi~istration.
The thorough, detailed substantiation of the programs, balances, indicators and -
economic no rms, the creation of the necessary reserves in the five-year plan r2nder
it more stable and reliable in the organization of five-year operational relations
and in concluding long-term contracts for the shipment of goods, raw materials,
materials and complementary articles. On the basis of the indicators and economic
quotas, it is possible to develop and deepen the cost-accounting relations among
~ enterprises and between enterprises and supply/sales, transport, construction,
- planning/de sign, scientific research and other c?~rganizations. On the basis of such
_ a five-year plan, there develops a system of c~~st-accounting relations of the
sector as a large-scale operational complex, the main cost-accounting element of
which are the production associations. -
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The five-year plan also forms the basis for perfectj.ng the methods, for improving
the efficiency af counter-plans and of socialist competition, for strengthening the -
influence of the economic levers and stimuli and for the system of forming and
dCilizing the economic incentive funds for final results.
For the first time, it has become possible to evaluate--on all levels of economic
~anage~ent--the fulfillment of the five-year plan c~ulatively from the beginning
of the five-ye ar plan, and fulfillment of the annual plan, cumulatively from the
beginning of the year. Such an evaluation indicates not only the stability and
_ obligatory nature of the fulfillment of the five-year plan quotas. The basic
indicator valu~e attained is taken into account only once--~ahen the five-year plan
is drawn up--which stimulates the enterprises to search for and utilize supple- -
mentary reserves so as to fulfill the plan ahead of schedule. In the development
~ of democratic management principles and in the enhancement of the stimulatory role -
of the five-year plan quotas, stable five-year plans are assuming increasing
importance . _
According to the principle przsently applied in the development of the annual -
plans, the indicators of the annual plan muet not be lower than the five-year plan
quotas specified for the respective year. Under these conditions, the enterprises,
associations and ministries are granted extensive rights in regard to independent
development and specification of key indicators of the annual plans. Closely
connected with the operation of the plan system and with the enhancement of the -
role of the five-year plans in the management of the economic system is the
- development and implementation of scientific-technical, economic, social and other
programs of a different type. An integral part of program- and object-oriented
planning is the long-term approach.
In solving large-scale national-economic problems through a system of programs, one
obtains an overall description of the obj ectives, of the ways of attaining them and
of the resources required. The program- and ob~ectroriented method allo~as better -
to subordinate the priority allocation of resources to the implementation of the _
ob~ectives established, more purposefuily and completely to solve the problems
concerning acceleration of scientific-technical progress and establishment of an
advanced production structure and of sectorial ratios. The system of programs is
an important element in the consolidation of program- and objectroriented planning.
The complex programs are expected to hecome an important instrw~ent for optimizing
plan decisions, for improving the reproduction structure and for raising the level
of efficiency of social labor. The elaboration of the system of complex programs -
and plans for the economic and social developm~nt of the USSR organically links
sectorial and regional plans and vertical and horizontal production management.
In the Methodological Directives concerning the development of object-oriented
complex programs (TsKP), it is pointed out that these programs are necessary for
solving the most important national-economic problems and that they are an integral
part of both the long-term and the current state plans for the economic and social
development of the USSR. In the aggregate, the TsKP form the basis of pro,grammed
_ planning, which complements--in full coord~nation--the sectorial and regional plans.
The USSR State Planning Commission has approved a list of key economic, social and _
regional TsKP, which are subject to elab~ration for the near future. TE?e list -
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comprises 13 programs, including programs concerning reduction of manual labor,
efficient use of the fuel and energy resources, ecanomical input of inetal, produc-
tion of highly critical materials that are presently imported, meeting the demand
of the pop ulation for new industrial goods, and operational development of the
Baqkal-Amur Railroad zone.
The USSR State Planning Couimission has also approved and put into effect the
methodological directives concerning development of TsKP for solving regional
problems and for establishing and develaping regional production complexes (TPK).
These are a different form of TsKP and they are required to solve the problems
concerning development of new regions, reorganization of the economic systems of
newly developed rayons, establishment and development of the TPK, and various
problems--economic and social problems, problems concerning the development of the
infrastructure, e tc.--in co~ection with the given region.
The Methodological Directives concerning the elaboration of the s~ate plans for
economic and social development of the USSR provide a method for drawing up ob~ect-
oriented, complex scientific-technological programs aad programs for solving key
scientific-technological problems. The long-term schedule provides for the develop-
ment of approximately 40 object~-oriented, complex scientific-technological programs
and over 100 programs for solving key scientific-technological problems. The
- targets for the aforementioned programs are specified for all ex~ecutors in the
directive plan indicators. Moreover, the leading ministries establish detailed
quotas and stages of program fulfillment for the individual years of the five-year
plan. Thus, in regard to the production and introduction of new macbines, equip-
ment and products, the targets specify tfie scientific research work, the drawing up
of the technical documentation, the production and testing of models, correction of
the manufacturing instructions, preparation of production, production of a test
series, and organization of series production. Tfiis is a big step aTnead. However,
~ the programs do not yet comprise tfie .stag~ of furnishing the production process
with new technologies.
In this conne ction, it is important that the programs for the establishment of
machin~ systems be supplemented by other programs for the solution of sectorial
problems, for the re-equipment and reorganizati'~n of associations and enterprises
, and for production specialization and concentration (they are drawn up in the plans
for raising the technical level of the sectors). They should be oriented toward
creation of the necessary production potential, toward furnishing the sectors of
~ the national economy with new equipment, technologies and machine systems and
toward raising the technical level of production and of the ,goods produced. Such
an approach means that the production and capital construction plans must be based
on the scientific-technical progress plan, that they must become its extension and
its materialization in output and fixed capital. Every ruble of capital invest-
ment must be evaluated from the point of view of its efficiency in raising the
technical level of production, not only in terms of its increasing the capacities.
Of great importance in regard to this problem is the initiative of the collectives
of the ministries, departments, associations, enterprises and organizations. A
nwnber of ministries are actively engaged in mastering the system of programs in
planned sectorial management. Valuable eh-perience is being accumulated in the
electrotechnical industry. Here work is being done on a nu~ber of complex scien-
tific-technical programs that are implemented on the sectorial level and witfi the
assistance of "Interelectro" memb~sr countries.
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In the llth Five-Year Plan, the seetor plana to participate in the implementation
- of large-scale TsKP, including programs for making more efficient the utilization
of fu~el and energy resources, the operational development of the Baykal-Amur Rail-
ro~d zone, et~. With the collaboration of the associated ministries, complex
- programs are being developed for producin~ fundamentally new materials and comple-
. mentary articles for the electrotecfinieal industry; other industrial programs are
aimed at raising the technical level of production and of the technical re-equipment
and reorganization of enterprises.
The system of p:~an indicators is a key instrument of planning and management. To
imprave the indicators, one does not simply replace one indicator by another-a
specific indic~tor by an accounting indicator or a value indicator by a natural
indicator; rather, one must examine in detail the place, the functions and the
interactions of the entire system and of every indicator in the economic mechanism.
Tlie plan indicators reflect specific characteristics of the socialist system of
economic operation, the effect of the totality of economic laws. They must
describe all aspects and proportions of economic and social development, the
production potential and its technical-economic level, the requirements of society
and the extent to which they are met with due regard for the limitedness of the
resources, the final work results of each unit of the national-economic complex,
the factors deterrnining their economic growth, and other processes requiring
systematic regulation. The system of indicators and norms must cover not only tfie
plan decisions, b ut the production process itself, the distribution and accounting,
the cost-accoim ting relations, the plan implementation, and the plan ob~ectives and
targe ts .
Of great importance in regard to the accomplishment of these tasks is the organic
unity of the measuring and motivating fimctions of the indicator system eiaployed in
_ planning. The unity of the aforementioned functions entails interconnection
between the national-economic and cost-accounting criteria fn the proc~esses of
production and centralized planning and the development of operational ir~dependence
_ and creative initiative on the part of the worker collecti~~es.
The stimulatory role of the plan indicators depends on how fully they reflect the
economic laws, how correctly they show the ob~ectives, the resources, tfie effi-
ciency of resource utilization, the production targets and capacities, the inter-
ests of the national economy and of each working collective, and on what space is
assigned to them in the methods of work evaluation, in the econornic, ma.terial and
moral stimulation and motivation.
The 25th CPSU Congress set the task to enhance in e conomic management the role of
the indicators describing the final work results. Thus the final results are
planned and evaluated in three directions: more complete fulfillment of tfie demand
~ of the national economy and of the population for goods with certain qualitative
- and use characteristics; insuring a dynamic reproduction process and expansion and
technical improvement of the production potential; attainment of a high rate of
growth of overall production efficiency.
The new system of specific indicators and norms i~ distinguished by several charac-
teristics. The indicators and norms specified in the five-year plan Cwith annual
- b reakdown} are obligatory also in the elaboration of the annual plans that
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implement and concretize the targets of the five-year plan. They are addressed to
the industrial ministries, associations and enterprises as a unified target syetem.
In view of the dynamic nature of the scientific-technological, economic and social
pro~esses, tiie structure of the indicator system varies over time and the system is
differentiated with regard to the characteristics of the sectors, industries and
concrete tasks of the plan period. At the ~ame time, the indicator system must
show a certain stability in tbe five-year period; it must show unity and inter-
action in regard to the plan periods (five-year plan--year) and.in regard to the
_ levels of management (national economq ministry--association--enterprise). The
- entire system of plan indicators consists of accounting and specific indicators and
also of indicators fimctioning as norms and limits. The most comprehensive group
are the accoimting indicators, by means of which the validation and detailed
_ description of the plan are effected. For example, ~ust to determine--in natural
terms--the production volume of concretE types of industrial goods, over 12 million
indicators are employed.
The relatively small group of specific indicators represents a form of hringing the
state plans for economic and social development to the e~necutors in a directive
manner; it also represents a form of control regarding fulfillment of the plan.
However, it would be c~rong to consider the indicators an instrument of administra-
tive control. They are a most important form of optimally combining administrative
and economic m~thods of control, of implementing in planning ar~.! management the
Leninist principle of democratic centralism. For closely connected with the direc-
tive indicators of production vol~une and efficiency and of produc~ quality are the
_ economic levers and incentives, the sources and quantities of the resources
directe d to the economic incentive funda. In the final analysis, all forms of
socialist competition and of counter-planning are oriented toward attainment of the
plan targets, which are reflected in the directive norms.
_ For the most part, the new system of indicators reflects the direction of the plans
toward improvement of production efficiency, accelerate d introduction of new tech-
nologies, improvement of labor productivity and product quality. Thus, in the
commodity output division for most of the industrial branches, there is being
established the quota for net production (normative) increase. The indicator will
become a key indicator with introduction of the net production norms, i.e. begin-
ning on 1 January 1982. In 1981, the net production (normative) indicator will be
applied to over 2,000 enterprises of 8 industries. In this division, the plans
also provide for indicators of production increases of top-quality goods. In the
" current year, the indicator referred to is used in most industries. In the llth
Five-Year Plan period, it is essential that we radically improve the attestation of
product quality as well as the planning and the accounting and reporting in con-
_ formity with the newly adopted norm regulations.
The established indicators and norms concerning labor are supplemented by indica-
tors and norms of social development at all levels--from ministry to enterprise.
They include: increases in labor productivity in regard to net production (norma-
tive) or another indicator that correctly reflects the changes in labor input; wage
norms per ruble of output; norms concerning reduction of manual labor, and norms
concerning formation of incentive funds. In the present demographic situation, it
has been conaidered expedient to set work force limits for associations and enter-
prises for the purpose of improving the organization of the allocation and
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utilization of labor resources. For 1980, wage norms per ruble of output have been
affirmed for nine branches of industry. The res ults obtained by these industries
- will become the basis of transition to such norms in other industries. In 1980, _
the work force limits and the quotas concerning reduction of manual labor have been -
tested. Experience has shown that these indicators must be improved and more fully =
coordinated with incentives and penalties.
Most of the diffic ult problems are connected �aith the planning of the new f inancial
indicators that are characterized by the establishment of a general norm fur profit
distribution, payments to the state budget, and budget allocations for the individ-
ual five-year plan years. Here the ministries are fully responsible for fulfi.llin~
the plan in re gard to profit transfers to the budget. Nonfulfillment of tfie plan
accordingly re duces the profit share remaining at their disposal. Such a system of
~ profit allocation in the five-year plans is already b~eing employed in a number of
ministries (Ministry of Heavy Machine Building, Ministry of Power Mflchine Building, ~
- Ministry of Agricult ural Machine Building, Ministry of Electrical Equipmenr. Tndus -
try, Ministry of Instrument Making, Automation Equipment and Control Systems) and
' will be given wide practical application. G~ith due regard for the concrete condi-
tions, the profit quotas are in various industries replaced by the indicator of
_ production cost reduction. In 1982, along with the introduction of new wfiolesale
prices, a number of minist~ies will begin to use the profit allocation norm.
- We still have to insure the necessary reliability and stability of the financial
- indicators for the individual five-year plan years; we have to master the factors
that underlie the changes in the profit dynamics and that are dependent on the
- enterprises' activities; we must work out the principles of centralized budget
calculation at the cost-accounting ministry level.
In capital construction and in the constructian and installation organizations, the
indicator concerning introduction of fi~aed capital, production capacities and
projects is assuming increasing importance.
A new element is the limiting of state cagital investments and construction and
~ installation work (including those in technical re-equipment and reorganizati.on of =
operative enterprises) to 5 years, which limit is not subject to reestablishment in
the annual plans and which radically changes the nature of that indicator. The
volume of capital investments used to be an evaluative indicator, the use of which _
often led to inefficient utiliTation of resources for the sake of attaining the
planned capital investment volimme irrespective of the putting in operation of fix~ed
~ capital, capacities and projects. The limit represents a resource indicator that
describes the threshold value of the capital investment input in the planned start-
up of finished enterprises, capacities and projects and in the establishment of
normative semifinished product stockpiles. The main criterion in this respect is
resource economy in the fulfillment of the planned work volume.
_ The targets for fulfillment of the scientific-technical programs, for raising the
technical level of production and improving the quality of the main types of goods
produced and the savings resulting from scientific-technical measures are becoming
the most important plan indicators concerning introduction of new technologies.
The indicators of the economic effect produced as a result of the elaboration,
development and introduction of new technologies and other measures based on
scientific-technical progress are for the first time used as specific indicators.
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A number of industries have already gained some experience in regard to the plan-
ning of this type of indicator. In tfie Ministry of Electric Equipment Industry, a
new regulation is being applied in regard to the planning, accoim ting and reporting
- of the economic effect resulting from measures for rais.~tng the technical level of
_ production and improving labor organization, management and product quality.
We have developed methods of calculation and we have established for each sector as
a whole norms for determining the volume of input in scientific research, eaperi-
mental design and technological operations and for determining the magnitudes of
the Unifie d RNT jnot further identified] Fund and of the wage fund of scientific
organizations for the period from 1981 to 1985. In the llth Five-Year Plan, it
will be necessary to master the indicators of the national-economic and cost-
accounting efficiency of new technologies in all industrial sectors.
The various annual plan indicators establiehed for the corresponding qear of the
, five-year plan are being concretized and defined more accurately. For tfie indus-
trial ministries, we are setting targets for co~odity output in natural terms (hut
with the products list being more comprehensive than in the five-year plan), for
putting in operation basic assets, production capacities and projects, for payments
to the state budget and aliocations from the budget, and for the volume of material
resource shipments. Other indicators and norms are established by the industrial
ministries of the USSR in coordination with the USSR State Planning Co~ission, and
by the republic ministries, in coordination with the state planning commissions of
the union republics. The industrial ministries establish a number of indicators
independentiy, proceeding from the five-year plan targets or norms for the
corresponding year.
The situation is different in regard to the indicat~r of the volume of output sold.
TEiis indicator is worked out only in the annual plans and it is specified for the
ministries, departments, associations and enterprises for evaluating the fulfill-
ment of the quotas concexning commodity shipments in accordance with the agreements
and supply orders for export goods. With regard to economic motivation and evalua-
tion of the work results, nonobservance of the deliveries in the products list
(product assortment) indicates nonfulfillment of the commodity sale plan and a
corresponding reduction of the in~entive funds. This reduces the negative influ-
ence e~oerte d on the enterprise's activity by the indicdtor of volume in value
terms, since it is now impossible to orientate toward production of more profitable .
or expensive goods. Unfortunately, only approximately 60 percent of the industrial -
enterprises completely fulf ill the co~odity shipments in accordance with tfie -
agreements concluded. A number of ministries, above all the USSR Ministry of Light
Industry, grant the associations and enterprises very favorable conditions regard-
ing the payment of bonuses to the e~oecutives in relation to implementation of the
shipments.
Measures are being taken in regard to improvn?enti of the natural indicators on the
basis of broad application of up-to-date methods of determining the efficiency,
productivity, quality and other use characteristics of machines, equipment and -
other products. The production of equipment is planned on the basis of an
e.xpanded products list. The indicators expressed in tonnage will if necessary be
used as accounting indicators.
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Already, changes have been made in tbe indicators for 15 types of materials
- handling, loading and unloading and warehousing equipment . In regard to products
of the machine building industry, we Iiave improved the natural indicators for 70
types of inachinery and equipment; we have eacpanded the centrally plaruied products
list (8~ items~ and the products list of complete sets of equipment, process linee,
installations and machine units (162 items) . For example, the Ministry of Elec-
trical Equipment Industry has developed a unified electrical products list to be
used in planning and reporting on the following levels: ministry--USSR State
Planning Commission--USSR Council of Ministers. A draft plan for 1481 and for the
llth Five-Year Plan is being developed on the basis of new indicators and a unified
products list. Similar work is being done in most of the industries, with the
e.xception of ferrous metallurgy, which has not yet fotmd an alternative to tonnage.
Side hy side with the improvement of indicators carried out within the complex of
measures oriented toward acceleration of the NTP and toward organic combination of
the plans for development of science and technology with other sections of the
plans fo r economic and social development, an important role is assigned to expan-
sion of tfie plans for technical sectorial development. Many ministries have
developed or specified regulations concerning the procedures to be followed by the _
plannin g and scientific res~arch organiza:ions and KB [not further identified] in
regard to the complex of operations conce:c~ning reorganization and e~ansion of
operative enterprises .
An important measure was the evaluation--carried out in 1979/80--of the technical -
quality of the output of ma.chinery, equipment and other production technology. The
- first da ta that are now being received form the basis for planning the improvement
of the te chnical-economic indicators of manufsctured and newly developed products
and of obsolete, discontinued types of products.
_ There is a number of ineasures that aim to develop a program of state certification
of product qnality, to work out coaplez programe for etandardizing technical pro-
ducta and coneumer goode, including basic raw ~aterials, materials and complemen-
tary prodncts, and also systematically to revise outdated standards. This will
ma1Ee it poasible etill more conaistentlq to implement overall product qualitq con-
trol. In most of the machine building ministries, the volmne and share of top-
qnality productsare increaeing year af ter year. In electrical engineering, for -
exemple, the top-quality product share of the ontpnt snbject to certificr~tion amount-
ed in 19 79 to 55.9 percent (45.2 percent of the overall volume). The miniatry plans
to continue the production restoration o~er the next feW ~ears.
The 25th CP3U Congresa emphatically establisheri the ta~l~ of enanring the necesearq
plan ba?ance. A basic prerequiaite for eaccnaefully acco~pliehing this task is the
developaent of a eystem of five-year balancea and the eatablishment of reserves.
Already, preparatimns have been made for drawing np material balances (on the basis
of an expanded products list) and plans for distribntion of resources among the
principal aupply organizatione for the individual yeara of the five-year plan.
The USSR State Planning Committee and the USSR State Conunittee for Material and
Technical Snpplq have defined more preciaely the prodncts liet, according to which =
' there are draWn up--withia the framewark of the plane for economic and aocial de-
= velopanent of the USSR--the material re~ource balancee and the resonrce allocation
plans, vhich are correspondingly established by the USSR State Planaing Comanittee,
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the USSR State Committee for Material and Technical Snpply, the USSR ministries and
departinents and the councils of ministers of the nnion republica. Beginning with
the llth Five-Year Plan, balancea based on the producte list of the USS& Si~:ate
Planning Cou~ittee will be drawn np for over 400 tppes of goods (for each year of
the five-year pla~; for 330 of these items, allocation plans will be drawn up for
the principal supply organizations.
To put the plan targets and balance calculat4ona on a more eolid basis, the USSR
State Planning Committee has eatabliehed a system of progressive norms and quotas
and a procedure of establishing the targets concerning average reduction of the
rates of conswnption of material resources with dne regard for scientific-techno-
logical advances. The system of progr~ssive technical-economic norms and quotas
= comprises 10 orientationa, including input and savings of raw materials, materials,
and fuel and energy resourcea, quotae of production capacity utilizatfon, propor-
= tionate capital investments, norme and quotas for determining the demand for equip-
ment and cabel products. In accordance with thie system, the ministriee and de-
partments work out the basic norms and quotas that are naceseary for drawing up the
plan for economic and social developmeat of the USSR for the period from 1981 to
1985.
The USSR State Planning Committee, the USSR State Committee for Material and Tech-
- nical Supply and the ministries and departments bear increasing reaponaibility for
balancing the commodity output plans and for the allocation balances and plans
drawn up by them in the five-year and annual plane. They are implea~enting a system
of ineasurea aimed at strengthening direct operational commnnication and contractual
relatione, at developing progressive medea of ateady supply for enterprises aad
conatruction organizations, at expanding the netrork of company warehousea for the
marketing of conaumer goods, at improving the orgaaization of the wholesale trade
fairs and at strengthening plan and contractnal discipline. Ia 1979, the volume of
comowditq deliveries based on direct co~unication amonnt~d to 36 parcent of the
overall volvme of outpnt eold. We feel that this work maat be intenaified.
The basic orientntione regarding inpro~ament of the capital coaetruction planning
are expected consiatently to impleaent the measnres that are atiipnlated by the de~
cree paeaed by the CPSU Central Committee and the USS~ Council of Ministere and
that are aiwed at improving the plenaing and the economic motivation in industry
- and capital conetruction. At prnsent, preparatione a=e being made for drawing up--
beginning with the llth Five-Year Plaa--stable five~qear plans for capital invest-
ment that are balanced--with due regard for eatabliehaent of the neceseary re-
servea--with the material and eqnip~ent rnsonrcea, with the capacities of the con-
atruction/installation and planaing organizationa, and with the labor and financial
resources. This enaures the priority of capital ineeatmenta, resourcea and equip-
ment for the r~novation and technical re-eqaipment of operative enterpriees on the
baeis of the latest machinery and technologies. Maasnree have been adopted ~.o re-
atrict the construction of new enterpriaee and to ezpand operative enterprises
through full utilization of the available cagacitiea and through the ob~ective of
introducing in the national econo~y the�latest advancea in the field of produc~tiaci
technology and equipment. Within the fremework of the five-year plans, liste will
be establiahed of enterprises and iastallationa, conetruction of Which ia newlq be-
ginning, and of enterpriaes snbject to renovation and eupaneion.
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In the planning, `rork evaluatian and econosic motivation af the conetrnction/instal- _
lation and planning/rese~rch organizations, the indicators concerning the final re-
sulta of their ~ork astd i~proved efficiency of capital investments are aseuming
greater importance.
The moat important specific indicators are the following: Startup of prodnction
capacities and projecte, including ezpaneion of capacities on the basie of technical
re-equip~ent and renovation of operative anterprises; increase fn labor productivitq;
profit (for the individual organizations--raduction of the cost of constraction and
installation work); targeting of the introduction of new tect?nology. ~lith the ea-
tabliah~ent of an estimate/norm baee in the llth Five-Year Plan, we will be uaing--
in the planning of labor productivity in the construction and installation organi-
zatione--the indicator of net ontput (normative) or another indicator that more ac-
curately reflects changes in labor input, and in th~ planniag of the wage fnnd, we
Will be using qnotas per ruble of ontpnt.
In 1981, we muat complete--with due regard for the regnlatione set forth--the intro-
duction of settlements betweea the clieat and the~. contractor for fully completed
enterprises, priority compleaes, sactioas and pro~ecte that are turned over to be �
put in operation. The production and equip~ent deliwery planning and the financing
of capital iavest~nents are not reatricted to the frame`+ork of the annual plan; theq
are stipulated for the entire period of construction, up to the actual startup of
the enterpriees and compleaea. In the system of financing capital constrnction, an
- important m~ode is the banl~ loan involving utilization of fnnda freed at the client's
due to the transition to settlement without intermediate payments.
To shorten the planning cycles, to build neW large-scale enterprisea and t~~ put an
end to the rapid obaolescence of the capacities established, we are extend_tng the
practice of combining the planning periode with the constrnction and startup of
underway complexes and projects. Within the frameWOrk of the state plans for econo-
- mic and social development of the countrq, of the union and autonomous republics,
_ of the kraqs, oblasts, cities, rayons and of the ministries, departments, associa-
tions and enterprises, there is being developed a consolidated division for the
entire complex of ineasures. In this reapect, it is necessarq to consider the quali-
fications and professional expertise of the workers, the general educational and
cultural level of the population, improvement of the working, housing, living and
cultural conditione and of inedical care, and other measures in coordination with
production development and improvement of productioa efficiency.
FOOTNOTES
3. See ~'Sovershenstvovaniye khozyaqstvenaogo mekhaaizma. Sbornik dokumentov" CIm-
provement of the Economic Mechanism. Collected Documente], Izdatel~atvo "Pravda~'
1980.
COPYRIGHT: Izdatel~atvo "Pravda~~, ~'Voprosy ekonomiki~~, 1980
8760
CSO: 1820
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INTRODU~TION OF NEW TECHNOLOGY
BETTER TECHNICAL PROGRESS INDICATORS SOUGHT
_ Moscow VOPROSY EKONOMIKI in Russian No 12, Dec 80 pp 60-68
(Article by V. Astaf'yev, V. Kalish and L. Povolotskiy, Zaporozh'ye: "Improving
Indicators of Economic Effectiveness of New Equipment"]
, [Text] Improving methods used to determine economic effectiveness of new equipment
and reflectitig results of its introduction clearly and completely in plan and re-
port indicators both on the national economic and sector levels, as well as at the
level of cost accounting enterprises and organizations, are important factors in ~
successfully accomplishing measures on improving planning and strengthening the in--
fluence of the economic mechanism on increasing production efficiency and work
quality, Indicators of economic effectiveness of new equipment must, firstly,
strictly correspond to actual results obtained when specific measures for technical
progress are implemented, and secondly, be entered into the overall system of plan-
ning and economic management. The economic effect from implementing scientific and
_ technical measures, according to the decree by the CPSU Central Committee and the
. USSR Council of Ministers on improving planning, is among the ma.jor indicators of
the plan for economic and social development of a sector, which is changing the -
attitude to this indicator and imposing increased demands on its substantiation.
Now used in planning and accounting of the economic effect of new equipment is the
' Procedure for Determining the Economic Effectiveness of Utilizing New Equipment,
Inventions and Rationalizer's Suggestions in the National Economy (1977). A number
of its provisions require concrete definition to carry out tasks to further improve
planning of the economic effect and accounting of its results in plans for economic
activity of enterprises and in the norms and standards used in substantiating these
plans and evaluating the results of economic activity.
Development and use of a general indicator of economic effectiveness of new equip- ~
ment for solving problems at various stages of its development and various levels
of managing the economy, in our view, are hardly possible. It is evident that,
based on a unified methodological approach, ways and means must be proposed to em-
- ploy a number of indicators of economic effectiveness of new equipment that support
the identity of decisions made at one or another level of managing scientific and
technical progress. For this, in giving preference to the national economic ap-
proach to evaluating economic effectiveness, provision should be made for maximally `
possible linkage between the indicators of economic effectiveness and indicators of
' cost accounting activity of enterprises and indicators of effectiveness of invest-
ments in capital construction.
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In selecting the optimal alternative to design new equipment, just as in substanti-
ating the optimal alternative for capital investment, the minimum of reduced u~er
- outlays, calculated by formula [1] of the cited Procedure, has to be provided. To
calculate economic effect by the Procedure, a number of modifications to this for- _
mula is recommended; use of them gives rise to some methodological questions.
The user defines the amount of economic effect from use of the new equipment as the
difference of reduced outlays in using the new and superseded equipment by formula _
j3] of the Procedure. In doing so, although not mentioned directly (except para-
gr aphs 17 and 18), it is implied that materials, power, equipment, etc. are in-
cluded in production cost and capital investment during calculations of outlays by
the alternatives on wholesale prices being compared. Thus, the results of calcula-
tion of the economic effect are coordinated with the cost accounting indicators of
the enterprises producing and using the new equipment. But at the same tir~e, in
calculating the economic effect from production and use of the new means of tabor
in accordance with paragraph 13, reduced outlays should be determined and compared
by formula [4] both in the sphere of production and in the sphere of cons~nption.
By formula [4], just as by formula [SJ, calculations of economic effect are made
primarily by manufacturers or developers of new equipment, since users not only do
not have the information on reduced outlays for production of the equipment, but
also are not formally bound to be guided by tris formula, inasmuch as for them this
is new industrial equipment. They calculate the economic effect f rom use of new -
equipment by formula [3] of the Procedure and consider all outlays for materials
and equipment, including for acquisition, delivery, and assembly of new producCs,
not by reduced outlays, but by wholesale prices. This approach as a whole corre-
sponds to the principles of cost accounting and makes it possible tu consider t~~e
influence of new equipment on the indicators of economic activity of consumers.
In addition to the cited basic diff iculties with calculation of reduced outlays for
new products, a number of practical difficulties arise. Under conditions of a
multiproduct list and insufficiently high level ~f normative econom~, planning and
accounting of outlays for production, determining the capital-output ratio of the
individual models and designs of superseded and new products is very diff icult. In
the electrical equipment industry, for example, in many enterprises the number of
models and designs of products made is 5,000 to 20,000. Besides, the methodological
- principles for determining the capital-output ratio of multiproduct list production
have not yet been finished. Therefore, it is no coincidence that in establishing
wholesale prices, the accepted standard of profitability used is calculated not for
productive capital, but for production costs. Great efforts and labor input to
calculate capital-output ratio when engineering principles of design or technology
of manufacturing new products do not change radically are hardly advisable. For
multiproduct list production, in all cases the capital-o~utput ratio for a specific
model or design can be determined in a highly approximate manner.
_ The majority of electrical equipment, included in a specific parametric series, is
produced by many enterprises. These products have a dissimilar level of unit cur-
r ent. and c~pital outlays, and therefore, establishing economic eff ectiveness based
1 The bracketed formula numbers correspond to the notation syste~r used in the
Procedure to netermine the Economic Effectiveness of New Equipment.
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on individual or average sector reduced outlays for production of superseded and
new equipment entails great difficulty. To determine them, an effort similar to
that done in substantiating wholesale pric~s has to be made (calculate average
w~ighted amouuts, che..k ratio in parametric series, etc.), and calculations have to
be made not only on production cost, but also on capital-output ratio of the pro-
- ducts at various enterprises. It is practically difficult to ensure receipt of
data needed in each specific case of calculating economic eff ect. Ther~fore, in a
majority of cases, outlays for the sphere of production are determined on the basis
of wholesale prices, b ut reduced outlays are calculated only in the sphere of
utilization of goods and means of labor.
Based on what has been said, it is advisable from our viewpoint, in elaboration of -
the cited Procedure, to calculate economic effectiveness with determination of re-
duced outlays by sectors conjugatedfor the direct consumer of new equipment only by
large complexes (systems) of equipment. This may also be app].icab le for unique pro-
ducts of individual desi~n and small-scale ser~es production with a limited list of
product nomenclature at a specific industrial enterprise. For multiproduct list in-
dustries, :it is advisable to evaluate the majority of the measures of technical pro-
gress based on cost accounting mutual relations of the consumer and manufacturer of
new equipment, that is, based on wholesale prices of utilized goods and means of
labor, by the formulas in paragraphs 13 and 14 of the Procedure, modified on the
_ basis of the following supplements.
In substantiating wholesale prices, the profitabil~ty (Rf) of each group of pro-
ducts is determin ed in relation to the value of the productive capital used to pro- -
_ duce these products, but to establish the price of each specific type of product, ~
the normative pr~fit is scaled to the total production cost of all products and the
accepted standard of profitability (Rn) is established. If one accepts that for
superseded products, the capital-output ratio corresponds to the average value of
it by group of products and varies in proportior_ to the prodt~ction cost of the pro-
ducts, then the reduced outlays can be approximately determined the following way:
Zb = Sb + Yen � Kb = Sb + R f � ~ = Sb (1 + Rn) = Tsbs (1)
where Zb is reduced outlays, in rubles; Sb is production cost, in rubles; Ye is
n
the standard coef ficient of effectiveness of capital investment; K.b is unit capital
investment in productive capital, in rubles; Rf and Rn are profitability, scaled to
_ prodiictive capital and production cost, respectively; and Tsbs is the price of the
superseded product, adjusted for the accepted standard of profitability established -
for the given type of product.
- The suggested assumption is fully justified in our view, s ince for many machines,
apparatus and other products, the production techno~ogy is sCandard, while labor-
_ intensiveness is about proportional to the cost of the materials consumed. Besides,
- this ass~:mption would have to be accepted in determining the capital-output ratio
for each prod uct. The production cost of the superseded product in the calcula-
tions should be established at the level corresponding to the moment of its r.eplace-
- ment in production by the new one, that is, it should be adjusted to the level of
the normative prof itability at that moment.
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Developing production of a new type of product (equipment) may require additional
capital investment (compared to the average estahlished unit capital-output ratio)
associated with fundamental change in technology, introduction of new specialized
industrial equipment, etc., as well as outlays for developing a new design and put-
ting it into series production. In this case, capital investment in productiotl of
~ a new product (Kn) compared to capital investment in production of, the superseded
_ product (Kb) will be: Kn = Kb + 0 K, while reduced outlays for its production wil].
be:
Zn = Sn + Yen -(K.b + ~ K) N Tsn + Yen . ~ K. t2)
Based on this, in the sector instructions for the electrical equipment industry,
when the capital-output ratio of individual types of products cannot be determined,
calculations of economic effectiveness from production and use of. new products
- (means of labor of long-term application) should be made by the formula:
(Ilb - Iln) + Yen (Kln - Klb) -
E = TsbS � Q - (Tsn + Yen � 0 K) + ~ ~4�1)
R + Ye
am n
This formula2 defines more concretely formula [4], recommended by the Procedure,
for the often encountered cases when the capital-output ratio of individual types
of new products cannot be established with sufficient accuracy. Calculati~n by
this formula corresponds to the provisions of the Standard Procedure for Determining
the Economic Effectiveness of Capital Investment (1969) and can be coordinated witt,
cost accounting indicators of enterprises-consumers. The latter in stihstanti~ting
additional capital investment for development of production capacity and in estima-
ting the results of economic activity use wholesale prices (planned or approved) of
the new equipment. Calculation of the economic effect by formula (4-1) makes it
possible to correlate its value with an important indicator of price formar=~n--the
= upper limit of the price.
For manufacturers of new equipment, determining economic effectiveness by formula
- (4-1) also facilitates its coordination with indicators of cost accounting activity,
inasmuch as these indicators are determined on the basis of comparison of the
prices of new products with their production cost, labor-intensiveness, etc. -
2 In formula (4-1), the coefficient of equivalence according to productivity is
designated; -
- V T + Yen
2 = (Ll � [L2 ; Q 1 = ~n ; Q = lb ,
. b - T + Yen
n
It is given calculating on a unit of the product. Formula notation corresponds

- ' to "Instructions on Determining Economic Effectiveness of New Equipment, Inven- _
tions and Rationalizer's Suggestions in the Electrical Equipment Industry."
Moscow, 1978.
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- An important advantage of the 1977 Procedure in estimating economic effectiveness
of new equipment by its manufacturers lies in the fact that the economic effect
from introduction of scientific and technical measures aimed at improving produc-
tion and reducing outlays for product manufacture (formula [3] of the Procedure)
- can be summarized and compared with the economic effect from production and use of
_ new means of labor, also calculated by formula [4]. Outlays for production of new
products are considered directly (without adjusting them with use of the normative
coefficient of economic effectiveness) even for machines, equipment and instruments.
This is important when using indicators of economic effect for evaluating economic
activity. However, inc?icators calculated by formula [4] can be used to substanti-
ate the effectiveness of new products, plan and evaluate the activity of enter-
prises only i:E the identity of r~esults derived through formulas [1], ~3] and ~4] of
this Procedurc~ 1-;:as been proven.
The normative coefficient of effectiveness of capital investment (Yen) and the
normative provisions of reduction for accounting of the time factor (Ye), according
to the Procedure, are different quantities (Ye < Yen). Therefore, the effect cal-
culated hy formula [4] of the Procedure does not correspond to the difference in
- reduced outlays, since the estimate of annual current outlays and associated capi-
tal investment ~rill change. Consequently~ in selecting the optimal alternative of
ne~ equipment design, in acc~rdance ~aith the provisions of the Procedure for Deter-~
mining the Economic Effectiveness of Ne~z Equipment, and the optimal alternative of
capital investment~ according to the "Standard Procedure for Determining the Eco-
= nomic Effectiveness of Capital Investment," hy the minimum of reduced outlays, the
- economic effect~ as a rule, does not coincide for the majority of new types of
equipment, since the predominant share of it is aimed at capital construction (in
- building transformers, for example, x q8 percent},
An even greater divergence in calculations of the economic estimate of compared al-
_ ternatives is caused by the different treatment of the quantity R2, According to
the Procedure for Determining the Economic Effectiveness of New Equipment, R1 and
- R2 are parts of deductions from balance value for full restoration (renovation} of
the }aasic and new means of lahor. They are calculated as reciprocals to the ser-
- vice lives of r_he means of lahor determined on the hasis of their obsolescence.
When calculation accuracy has to be raised, they are taken from the data in appen-
dix 2 of the Procedure, In this determination, the criterion of service life based
on obsolescence is not given, but in appendix 2 the values of R are calculated
- based on reducing service lives by complex percentages. Therefore, the Procedure
makes it possible for calculations of the economic effectiveness of the same equip-
ment to accept values differing from each other by an order of magnitude. With the
existing divergence of values of R2, not only will the amounts of economic
~ 3 Amounts of the efEect may not coincide since it is a question of results of
operation of new equipment, estimated in the first case by reduced outlays
(calculating on a year), and in the second, for some period of service. Of
importance is the identity of conclusions on effectiveness or ineffectiveness
and the economically permissible bounds of price rises of new equipment when
operating parameters are improved.
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rOR OFFICTAL US~ ONL'1
effectiveness differ, but also the conclusions on the effectiveness of new products
(they may be directly opposite).
Such a situation occurred, for example, in discussing the wholesale price handbook
for electrical equipment steel used in ma'cing power transformers. Using the a~~me
brand of steel in ferrous metal'.urgy (in the same transformer) by calculations ac- -
cording to the Instructions for Determining the Economic Effectiveness of New Pro-
ducts turned out to be effective, but according to the corresponding instructions
for electrical equipment and power--ineffective. Changing the value of the trans- -
formers was assumed to be equal to changing their production costs when utilizing
the different brands of electrical equipment steel. The cause of the contradic-
tions in estimates of the economic effectiveness was the value of the accepted
standard of amortization deductions assumed in the calculations. Now in all sectors
the upper limits of prices for electrical equipment steel are calculated with the
same value of RZ and the prevailing wholesale prices are approved based on them.
The problem of determining and reflecting in calculations the real service l.ives of
products based on obsolescence in estimating economic effectiveness is relevant for
the majority of machine-building product types. In building transformers, for ex-
ample, the average product replacement period is 6 to 8 years. However, the eco-
nomically expedient service life for power transformers used for general p~.irposes
_ is far greater owing to a number of reasons. Analysis of the influence of techni-
cal progress on obsolescence of transformer equipment enabled establishing that the
effectiveness of its utilization today and in the long term owing to the invariabil-
ity of the engineering principle is determined by a relatively small improvement in
the technical-economic parameters of successively produced models. Calculation re-
- sults showed that it is inadvisable to replace a series of transformer equipmer?t
from an economic standpoint even after the 25th year of operation.
Prohlems of economic substantiation of periods of obsolescence of equipment have
not been fully worked out. In our opinion, in resolving them it is necessary to de-
~ limit the economic categories of "service life" of equipment functioning within
fixed capital and "expected production period" of this equipment until the emergence
of more improved equipment in the production sphere. The halting of output by the _
manufacturers of equipment of a particular design does not yet mean that ttie whole
park of machines used in the national economy is becoming obsolete.
Supporters of more stringent R2 values helieve that equipment service lives based
- on obsolescence are determined primarily by the actual periods for design replace-
ment in the production sphere. The economic significance of making R2 values more
stringent lies in enhancing the effectiveness of additional capital investment com-
pared to saving on current outlays in the long term. In essence, this is a veiled
rise in the normative coefficient of effectiveness of capital investment Yen.
Another consideration in making this value more stringent lies in the fact that the
amount of economic effectiveness may be overstated owing to inaccuracy or nonrepre-
sentativeness of the source data. There is no 3oubt that this is a fair assumption.
_ In this case, adjustment of the amount of economic effect should be made on the
basis of the appropriate corrected factors calculated for each group of equipment,
_ and not on the basis of raising the Rz factor for "insurance."
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When the length of the period before onset of obsolescence of equipment has been
substantiated scientifically, and consequently the economic advisability of replac-
ing by new equipment after a specific number of years of operation has also been
demonstrated, this should be reflected not only in calcualtions of economic e�fect,
but also in the norms for amortization deductions. Until this problem is solved,
in our view, the prevailing norms of amortization deductions for coordinatian of
indicators of effectiveness of new equipment with indicators of cost accounting
activity of enterprises and effectiveness of planned decisions for capital construc-
tion should be used in calculations of the economic effect of new equipment made at
the level of enterprises and manufacturing sectors. This suggestion corresponds to
the Procedure for Determining the Effectiveness of New Equipment, and therefore, it
should be clearly stipulated in the practical instructions for use in calculations.
In correlating the indicators of effectiveness of new equipment at the various
levels of management, it is difficult to determine the amount of economic effect
for each new type of product. The overwhelming majority of products, machines and
apparatus is used by the consumer in a complex and in conjunction with other de-
vices. Therefore, it is difficult to determine the influence of parameter changes
for each type of equipment on the end results of the operation of the system (com-
plex), and in many cases it is impossible. There arises the problem of determining
the economic effect obtained from each type of equipment. Used most often for this
_ are the methods of expert estimates and distribution of the effect in proportion to
the value of the equipment based on its complexity and innovation. With all the
simplicity of the expert estimate method, it is subject to the influence of subjec-
tive factor.s. In distributing the effect in proportion to equipment value, also
considered in it is the value of the materials making up the products that are not
created directly by the producers of the work. Besides, even in this case one can
- not do without an expert estimate of the complexity and innovation factors.
Consumers are not now interested in substantiating the economic effectiveness of
each new product, since they do not bear direct responsibility for it, nor do they
have enough specialists to make such calculations. At the same time, designers and
manufacturers of equipment have to know the economic effectiveness of each specific
type o� equipment, inasmuch as the question of the advisability of its development
is considered and *_'eGC~lved independently, and in evaluating the activity of organi-
zations and enterprises, a major indicator is the economic effectiveness of new
products. Besides, workers in the sector producing new equipment have a material
interest in demonstrating the maximal amount of effect of the new product.
_ To estimate the effect from using each new type of equipment, in our view it is
necessary to organize specialized studies under the direction of the consumer (cus-
tomer) who calculates the economic effect from the complex of equipment as a whole.
Such study should be performed by the joi.nt efforts of collectives of scientific,
design and planning organizations of the variaus departments.
A number of sectors use indicators to reduce comparable types of equipment operating
in complexes (systems) to conventional interchangeability. Both in the 1977 Proce-
dure and in seceor instructions drafted in accordance with its provisions, the pro-
ductivity change index is recommended as an equivalence factor. Its use is legit-
imate when the volume of work performed by the new machine or complex of equipment
in which this machine is used increases as a result of a change in the parameters
of a new product. Sut such reduction to the conditions of comparability of the new
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and replaced alternatives is not al~rays possible. Thus, for many types of equi_p-
ment used in electric power, circuits for electric supply and drive and circuits
for monitoring and indicating, the indicator "productivity," as well as the indica-
tore "amount of wurk performed" and "volume of production," makes no physical sense
gt all. For example, what sort of productivity or production volume may one spe~k
of that applies to high and low voltage switches, circuit breakers and instrument
transformers, relays and voltage regulators under load, or to the overwhelming
majority of high and low voltage apparatus in general?
The coefficient of equivalence for productivity is also used to reduce to conven-
tional interchangeability alternatives of equipment in which no end product is tnade
and which performs no specific indu~trial operation in its production. A conven-
tional base for subst.antiating the effect of new equipment is thereby artificially
created, that is, comparison is made on the assumption that if a product with the
given technical parameters did exist in the parametric series, then replacing it
with a new product with improved characteristics would yield precisely that
economic effect.
The following examples are indicative of the methodological incorrectness of this
approach to estimating the economic effect. Based on the capacity of connected
facilities at a specific point in an actual power supply circuit, a 32 MV A trans-
former has to be installed. Since the standard parametric series provides for 25
and 40 MV A transformers, the advisability of making equipment with the intermedi-
ate capacity has to be determined. If developing the new equipment would lead to
results strictly corresponding to the regularity of the parametric series, the
economic effect from its use calculated &y the comparison method described above
would be negative. In practice, in the power supply circuit in which it is possi-
ble to use a 32 MV A transformer, a 40 MV A transformer will have to be used. But
_ in this case, use of the new transformer ~aill be effective only if outlays f or its
production and operation, compared to the one being replaced, are reduced by an
amount that exceeds the unit outlays for development and implementation of series
production.
Even more obvious is the methodological incorrectness of using coefficients of
equivalence for productivity with calculations of economic effectiveness in cases
when the necessity and technical possibility of creating transformers with extreme
capacities emerge. Experience in making such equipment has shuwn that the increas-
ing technical difficulties and limitations lead to a relative decline in some para-
- meters compared to formal extrapolation of regularities,of the parametric series.
In this case, using the coefficient of equivalence with calculations of economic
effectiver.ess of new equipment, as a rule, also leads to obtaining negative results.
In a real system (circuit), using one new transformer with increased capacity in
place of two exi.sting models makes it possifile to ofi tain a substantial economic
- effect in the majority of cases.
In modern complexes (systems), technological links hetween individual elements are
- firm. Therefore, in determining economic effectiveness, these links cannot be dis-
- ruptsd and the individual elements of the system considered since this introduces
distortion in their economic characteristics. In using coefficients of equivalence
for productivity to reduce alternatives to cc~;lventional interchangeaiiility, the
calculated economic effect does not reflect the actual result of using specific
equipment in the total effect of the complex, and the sum of the effects of the
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individual types of equipment, as a rule, differs significantly from the effect
obtained as a result of operating the entire complex. ~
Consequently, development of theoretically substantiated criteria for per unit allo-
cation of the effect of the complex and at the same time extensive development of ~
the joint efforts of equipment consumers on substantiating the economic effective-
ness of specific types of equipment, operating in the complex and used extensively,
are ~f great practical importance. In any case, allocating the effect obtained
from the whole complex must occur under the direction and with the direct participa-
tion of designers and customers of complexes and this condition has to be met: the
sum of the effects of the individual types of equipment must equal the value of the
economic effect from operating the complex (system) as a whole. Specific recommen-
dations on these questions have to be included in the instructions and directives
on determining economic effect that are developed and approved in elaboration of
_ the Procedure under discussion.
In the current stage of economic development, realization of the achievements of
technical progress effects not less than 70 percent of the reduction in production
costs of industrial products and the greater part of the growth in labor productiv-
_ ity. Therefore, it is extremely important to consider the impact of each measure
on new equipment in the plans for the enterprises and organizations in which this
equipment is introduced, to determine the actual savings and to provide material in-
centives to the collectives for results obtained.
_ In accordance with the 1977 Procedure, the economic effectiveness of new equipment
must be clearly reflected in the norms and standards and in plan and report indica-
� tors. These requirements are not met by determining the economic effect by the
standard yearly amount of introduction of new equipment. In the process of an ex-
periment in the electrical equipment industry, another procedure was developed for
accounting for the economic effectiveness of technical progress and for reflecting
it_in the plan and reporting indicators of the operation of enterprises and the sec-
tor as a whole. Let us examine some basic provisions of this approach.
In calculations of the economic incencive funds for improving production technology
and labor organization, both when planning for new equipment and after its introduc-
~ tion, not only the total economic effect by reduced outlays, but also the total re-
. duced production cost of the product is determined simultaneously. Resources for
economic incentive for in~roduction of new equipment are included in the financial
plan of an enterprise only on condition that the corresponding savings from reduc-
- tion in product production cost have also been considered in the enterprise plan.
_ Calculations are made on the real volume of the first year of introduction or in-
crease in this volume over the course of two years after the start of utilization -
- of the new equipment.
Economic incentive for the collectives and immediate executives follows the measure
(and in the amount) of actual accomplishment of each planned measure. In the pro-
cess, new equipment is considered introduced into production, according to the sec-
tor Instructions in the electrical equipment industry, after the appropriate
material and labor normative provisions have been changed at the enterprise.
It is not advisahle for the new equipment const~mer to set up a special complicated
and expensive accounting and reporting system on the effectiveness of use of each
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new product. From our point of view, for new itema used to produce products, the
economic effect should be considered in planning production cost and profit for the
enterprise as a whole, as stated above, and the consumer should provide for strict
accounting of the confirmed or actual effect and reflect the results of using new
items in the appropriate standards and consolidated calculations.
The sum of the economic effect of the new products being output influences the
rates of growth of commodity production in comparable prices and labor productivity;
it is an important indicator in summing up the results of economic activity.
Therefore, in determining the economic effectiveness of new equipment, it is
- advisable to use indicators differentiated for the various levels of economic
management. These indicators may differ, but they must correspond to the criterion
of national economic effectiveness, ensure identical decisions and allow considera-
tion of the influence of new equipment on the results of economic activity in all
elements of the national economy. It is also necessary to accelerate development
of a unified complex procedure to determine the economic effectiveness of social
production, instead of the prevailing procedures, instructions and directives
intended to solve individual problems that in ~nany cases ].ead to contradictory
solutions.
COPYRIGHT: Izdatel'stvo "Pravda", "Voprosy ekonomiki", 1980
8545
CSO: 1820 ~D
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