CENTRAL INTELLIGENCE AGENCY Office of Research and Reports
'PVL
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In his speech ofpril lo the RSFSR conference of industrial and construction workers, Khrushchev expressed his exasperation at the persistence of shortcomings in construction programing in the USSR. The increase in unfinished constructionend we are dragged into this swamp by certain comrades who begin more and more new construction sites The more construction sites there are in the process of construction, the less materials and equipment every construction site will receive. The advantage lies not in the fact that wearge number ofsites where work has started, but in an accelerated pace of completion of projects. " He criticised both Novikov (Chairman of the State Construction Committee, Gosstroy, USSR) and Lomako (Chairman of Gosplan, USSR) for "deficiencies in their work [and] the disorder in construction" and called on Ustinov {Chairman of the Supreme National Economic Council) to occupy himself with Ihe problem. Immediately thereafter. Chairman Novikov canceled his plans to visit the US and told Ambassador Kohlcr mat Khrushchev had put him personally In change of completely reworking the present construction plans. 2/
1. Defects in Construction Programing
Construction programing is one of the most intricate and difficult problems faced by Soviet economic planners. There are morotate construction projects underway in the USSR, and the supply of construction resources (building materials, manpower, and equipment) is insufficient to meet the requirements of all projects simultaneously. Without adequate control measures, the supply of construction resources tends to be allocated among the many projects in accordussian proverb: "Each sister gets one earring. "projects in the USSR, therefore, generally take considerably longer to complete than would otherwise be necessary, and the inefficiency is reflected in higher costs. As the construction effort has increased
rapidly in size and complexity in recent years, the Soviet system of construction programing has become more and more inadequate to the task. The cost of such inefficient programing thus has reachedproportions in terms of additional production forfeited. Khrushchev,eries of statements, has shown that he has long understood this problem. He has not yetolution,that satisfies both the requirement! of the situation and the tenets of the Communist system.
With the supply of resources insufficient relative to the number of construction projects underway, Khrushchev has centered his attention largely on two kinds of corrective policies: (a) increasing the supply of construction resources and (b) concentrating the available supply of resources by reducing the total number of projects on whichis continued- The first policy would permit an increase in the total volume of construction performed, acceleration in completion of projects, and reduction of the cost of construction without reduction in the number of projects underway. The iecond policy would permit accelerated completions and lower cost of construction withoutan increase in the supply of construction resources or in the total volume of construction performed. The two policies are not mutually exclusive, but Khrushchev from time to time has shifted his attention from one to the other.
Io Ms speech onncident inhrushchev also issued the warning note that if development of the constructionindustry were not accelerated, it couldottleneck for the over-all investment program. In spite of such warnings, however, the rapid growth in the volume of construction work generally hasgrowth in construction materials (sec the table). The resultant shortage of construction materials and the noticeable deterioration of the situation0 must bo accounted the major factor in holding the rate of growth in construction work toercentercent1espectively, compared with an average annual increase. The sharp deceleration in growth of production of construction materials8 is largoly the result of inattention to the requirements of balanced growth. Production of precast concrete
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components (columns, girders, floor and ceiling slabs, and the like) has been emphasized strongly in recent years, but, at the same time,increases in production of other important construction materials such as brick, lumber, and steel structurals have been neglected. In
or example, production of lumber was slightly less thannd production of construction brick wasercent greater than
In his report toarty Congress in the falldiverted his attention fromyear program for economic development to some pressing current problems, particularly the vast panorama of unfinished construction projects evident throughout the USSR. Criticizing the shortcomings in construction, Khrushchev observed: "Apparently we should go so far as to stop the starting of new{projects] for some period, sayear, and direct all the resources that accumulate during that period to the swiftest completion of construction projects already underway. Exceptions can be permitted only for especially important projects, and only by decision of the Union government." Khrushchev hinted that additional steps might be taken and notedecree on the schedule of priorities in capital construction already had been passed. The major intent of the decree was lo strengthen the system of priority projects, bring the construction program intoith available resources by reducing the number of new starts inand reduce the volume of unfinished construction.
The reaction was fast and vigorous. Some republic plans indicated that the number of unfinished projects on which construction would be continued2 would be reduced substantially. The plan for the RSFSR2 providod for the start of construction ofajor projects compareduch new starts0/ In spite of the aura of reform, however, it was difficult to reduce the number of projects, to coordinate deliveries of materials and equipment, and to limit work on the large number of minor projects. Khrushchev complained in3 lhat Gosstroy and Gosplan had failed to review proposals to eliminate aboutrojects, with tbe result thatof these projects was undertaken after all. In reviewing the lists of approved projects, province and district Party committees cut back only
a small number of the total projects subject to their review. As oforef the most important projects that were to have been completed2 still had not been supplied with all their equipment, and the plan for construction work on the especially important construction projectshortfallreater than the shortfall at lower priority projects. In view of these and other difficulties in implementing Khrushchev's call forthe number of projects and concentrating on completions, it is not surprising that the volume of unfinished construction grewagain2 (see the table). Awareness of the failure to resolve many of the shortcomings in construction programingajor factor in the extensive reorganization of construction that was started in
2. Organizational Changes and New Appointments
Under this reorganization, construction was set up as an independent branch of the Soviet economy. Gosstroy, USSR, was reorganizednion-republic organ, and Novikov was appointed its chairman. State production committees for construction were established subsequently and subordinated to it.he chairmanship of Gosstroy, USSR, isistinctly more responsible and powerful position than it was before the reorganization, when its role was largely staff-advisory. At the November Plenum. Khrushchev argued strongly for establishing Gosstroy, USSR, as the operative head of the construction industry and for making it responsible for bringing the construction program into line withresources. 5/ The subsequent decree on the reorganization was more restrained and ambiguousn indicating responsibilities that already had been assigned under tbe decree of radical reorganization of the functions of Gosstroy, however, eventually was sustained. *
Thus, as Khrushchev so clearly indicated, Novikov is now in the direct line of fire in the battle to achieve more order in construction programing. The prospects for success, however, are not good. decrees, public exhortations, reorganizations of construction, and increasing centralization of decision-making in construction5
have yielded an uneven record of efficiency in the allocation ofresources. Most disturbing to the Soviet leadership is that in spite of ths system of centralized control over "especially important" projects that was initiatedhe backlog of unfinished projects increased disproportionately1 and again Tbe emphatic discussion of punitive measures in Khrushchev's speech ofpril strongly suggests that further changes in personnel and organizations will follow if improvemont is not soon evident.
Table
USSR: Companion of the Volume of Construction Work Performed with the Volume of Unfinished Construction and with Production of Construction Materials a/
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Voluns of construction work performed (billion rubles) b/
Volume of unfinished construction (billion rubles;
Volume of unfinished construction relative to the volume ofwork (percent!
Index of production of construction materials d/
Index of the volume of construction
work performed Ratio of the index of construction
eats rials to ths Index of the volume
of construction
a"! All value data are la adjusted prices Calculations are based on unrounded data.
work performed under the state sector of the economy, excluding privatecollective farm construction activities.
data. Tbe volume of unfinished construction is defined roughly as the volume ofPlace at unfinished projects that have not been cceanlssloned as operative. The largest cosrponent ofconstruction in the USSR is construction-installation work, which accounts for epproxlrately 8Cof the total; equipment Installsd or ln the process of being Installed in unfinished projectsaboutercsnt; the remainingercent is in other expenditures connected with unfinished projects.
Table
USSR: Comparison of the Volume of Construction Work Performed with the Volume of Unfinished Construction and with Production of Construction Materials
Continued)
i. ex is in terms of value added in production and covers aboutf the most important construction materials used in construction (ths data12 are based on smaller samples). The index,is notroduction Index. aterial as steel has many Important uses in addition to .its use in construction, which requires that an index of the steel used in construction, rather than simply production of steel, be incorporated in the Index of construction materials.
e. Although such factors as export and import of construction materials and the changing share of equipment-installation work in the volume of construction could affect the comparability of the two indexes, ths total effect does not appear to be suchnit Increase in the volute of construction should be accompanied by lessnit increase in the index of construction materials if the supply of construction materials ls to remain adequate. It should be noted, however, that the trend and directions of change in the ratios are more accurate than the specific ratio for any given year. roperly weighted time lag betweenand construction would is^rove the meaning of the ratioiven year, but Information is notfor making such adjustments. The base5ear in which building materials were in short supply relative to the volume of construction.
-GOMttBENTmrr-
Original document.
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