The USSR didn't tend to go in for economic competition, but it made good use of intellectual competition and competition for prestige. It was also relatively good at creating organisations that did a specific thing, and kept on doing that.
The competition between the MiG and Sukhoi fighter design offices, for example, was quite significant, driven by rivalry and prestige. They designed pretty good aircraft for far less money than the Western aircraft companies, and kept on doing it until the fall of the USSR meant that the money supply dried up.
In the same way, the OKB-1, OKB-52 and OKB-586 design offices competed fiercely, with different ideas of how the space and missile programmes should be organised. Political influence was important in these rivalries, but it wasn't measured on a single scale, and the virtues of designs were also significant.
The heads of design bureaus were engineers themselves - that was how you achieved distinction as an engineer in the Soviet system, by getting to start your own design bureau - and the politics inside a bureau seems to have been more restrained.
The system had some definite flaws. One of them came when one ministry's organisation needed something that fell within the responsibilities of another ministry, but that ministry did not produce.
For example, one of the problems with the unsuccessful N-1 moon rocket was the excessive weight of the first stage. That was because the USSR did not make aircraft-grade aluminium in thicknesses greater than 13mm. That was a responsibility of an aviation or metallurgical ministry, not the ministry responsible for rocketry.
The 13mm aluminium wasn't thick enough to make a first stage whose outer skin was also the wall of the propellant tanks. So the tanks had to be spherical to make them stronger, and the rocket needed a separate outer skin for streamlining. That weight disadvantage meant that all kinds of other things had to be pared to the bone, the rocket needed extra stages, and things got harder and harder from there.
Another flaw was that the system was pretty top-down. If the government wanted a better version of something that already existed, or knew it wanted something new and had a reasonable idea of what it wanted, that need could be met. Discoveries and entirely new inventions coming up from the bottom had a harder time than in less controlling systems, and political acceptability mattered a lot there. Lysenkoism was an extreme example. It was entirely wrong, but so politically acceptable that it became official doctrine for over thirty years.
The USSR did do some science for its own sake, but this worked best in mathematics and mathematical physics, which are fairly cheap to run. Talented people in those fields also tend to be quite dedicated.