I’ve repeatedly seen the word “design bureau” used in texts to refer to a company or organisation in the Soviet Union or its successor states that developed a particular technology. Example industries include aircraft (Mikoyan-Gurevich, Antonov, Tupolev), spacecraft (Korolev) or nuclear reactors (Gidropress).
I’ve never seen the term “design bureau” used in this sense in a Western context; taking the aviation example, I suppose the Western analog of MiG or Tupolev would be corporations like Boeing or Lockheed Martin, which would simply be called aircraft manufacturers rather than design bureaus. So I’m wondering what’s behind this term. It sounds to me as if the Soviets distinguished between the development of a technology and its subsequent mass production; the design bureau would do the R&D, but once that’s done other companies would manufacture the product according to the designers’ blueprints. Is this really how the technology sector, especially in aerospace and defence, was structured in the Soviet Union (and possibly still is in Russia)?
That’s exactly how it worked. Design Bureaus (in Russian - Opytno-Konstruktorskoe Byuro or OKBs) focused on research, engineering, and testing. They were numbered (OKB-122, OKB-11, etc) and assigned to specialties, but the bigger ones were often called by their chief designers - Andrei Tupolev, Artem Mikoyan, Mikhail Gurevich, etc. Thew actual manufacturing was carried out by manufacturing plants. For example the MiG-21 was built in GAZ-21 (State Aviation Plant #21) in Gorky, MMZ (State Aviation Plant #30) in Moscow, and TAZ-31 (State Aviation Plant #31) in Tbilisi.
In Post-Soviet Union Russia, these were eventually merged into several mega corporations like UAC and Rostec that handle both design an manufacturing. Out of tradition and “name brand recognition” they still use the old names like Tupolev, MiG, Sukhoi, etc.
The same thing happened in the USA when production needs were high & rushed, like in WWII. For example, the B-17 bomber was designed by the Boeing R&D Department, but then was built by Lockheed, Douglas, and Boeing itself.
The US Defense Department does that now: they often split a new weapon into separate contracts for the design phase and then the production phase. And sometimes after the design part is done, the production part is split into multiple contracts with separate suppliers (the military gets competitive bids plus redundant sources).
An additional reason was the way the Soviet Economy worked. As they weren’t capitalists, they had no real way of accounting for capital expenditure. R&D and tooling costs for a widget were all included in the price of the first widget off the production line. No concept of amortisation existed. Subsequent widgets were priced according to the materials, energy, and labour taken to produce them.
For small widgets, the state just purchased the first one and covered the costs. As the state owned all the factories this was just an accounting fudge anyway.
For military spending it got a bit more complicated, as not all designs made it to the prototype stage. So how do you cover the wasted R&D costs when there’s no prototype for the State to purchase? Hence the Design Bureaus. They could be funded directly without the need to produce anything for the State to purchase. Then when the designs were passed to the manufacturing companies there were no capital costs to worry about. The illusion of a non Capitalist society would be safe for another day.
That’s a 399 page pdf file! Any chance you could point out which bits you feel are relevant?
I’ve skimmed the first 40 or so pages and it seems to be the CIA trying really hard to understand the Soviet economy in Western terms. Rather than trying to understand it on its own terms. It was all about units produced, not profit and loss. To try and analyse it in those terms makes no sense.
In theory, it was a non capitalist economy. But in reality, there were some elements of capitalism that were hidden to make it all work. The State buying the first widget, for instance, to absorb the R&D and tooling costs.
The first few pages confirm that most capital expenditure came straight from the State. So capital investment in plant and tooling didn’t need to be amortised.
While Soviet factories were usually judged more by whether they met production targets than by whether they maximized profit, and major R&D, tooling, and factory investment could be funded directly by the state, that did not mean Soviet enterprises ignored costs. They operated under an accounting principle called khozraschyot, which tracked expenses, revenues, profits, fixed assets, and depreciation even though they were not functioning in a normal market economy. Soviet accounting explicitly included depreciation, and depreciation funds could help finance replacement equipment and further investment.
There was more to it than the State simply buying the first widget off the line at a price high enough to absorb all the R&D and tooling costs. A design bureau or research institute could be funded directly to do the development work, while the production factory could separately receive money and equipment for tooling and plant expansion. The big difference in the Soviet system was that investment decisions were made mainly through state planning rather than capital markets.
My apologise for the late reply. I too did not read those 400 pages. I did however, search for the word amortisation, and found several usages, making clear that the concept was employed in the Soviet economy, and even a table giving various values for amortisation.
I believe you are drawing a flawed conclusion. Yes, most capital came straight from the state, because it was a state run centrally planned economy.
The flaw is in assuming that this must mean no amortisation needed to be done. Maybe the state required each factory to perform “normal” accounting, including amortisation, and whatever capital remained was that which the factory then needed to use for daily operations.
The bureaux and factories weren’t totally separate. The Kazan Aircraft Production Association nearly always built Tupolev aircraft, KNAAPO nearly always built Sukhois, and so on. Even though all the factories and bureaux have been merged into United Aircraft Corporation today, there is still internal synchrony (and rivalry!) For example, KNAAPO builds and developed the Su-30 variants that drive from the Indian Air Force version, while another factory develops the China-market derivatives.