The Navy’s fleet of surface ships has just started to rebound from what officials acknowledge was more than a decade of neglected maintenance. But those same leaders say sequestration will inevitably reverse what progress they’ve made to date in changing their procedures to keep vessels seaworthy, and ultimately lead to a much smaller fleet than exists today.

The Navy says its ships have been working extremely hard since Sept. 11, 2001, supporting combat operations in Iraq and Afghanistan and other contingencies. That’s another factor officials cite for a major backlog in maintenance — a backlog that got worse this year with the onset of sequestration. Officials originally had to cancel major maintenance activities on 23 ships. They were able to bring that number down to eight after Congress approved reprogramming authority to shift money from other Navy accounts earlier this year.

But Rear Adm. Timothy Matthews, the Navy’s director of fleet readiness, said the outlook is still not pretty.

“As I look at the readiness indicators of our surface ships today and the likely scenarios we’re forecasting under a sequestered budget in 2014, I am very concerned,” he said.

If sequestration continues into fiscal 2014, the Navy says 64 percent of the ship maintenance availabilities it’s currently scheduled for the year are “at risk,” compounding problems for a fleet whose “material readiness” had already fallen below “acceptable levels to support reliable, sustained operations at sea and preserve ships to their full (expected service life)” by 2010.

Should the automatic budget caps that were triggered in 2013 continue, Rear Adm. Thomas Rowden, the Navy’s director of surface warfare, told the House Armed Services Committee the Navy would have to prioritize its remaining maintenance resources carefully.

“Those ships scheduled to deploy in fiscal ’14 and fiscal ’15 will receive the priority for both training and maintenance dollars. The balance of our surface ships will not receive their required maintenance,” he said. “In fact, we project that over 50 percent of the scheduled surface ship maintenance availabilities will need to be deferred. If not corrected in future years, these ships will not stay in service to their projected service life, and our Navy ship count will decline accordingly.”

If ships retire before their expected service life under sequestration, the Navy currently estimates its fleet would shrink from 282 today to 257 by 2020 — a far cry from the approximately 300-ship fleet the Navy currently aspires toward during that year.

And officials say even though they’ve been able to restore most of the 2013 maintenance availabilities they originally thought they’d have to cut, those maintenance periods are taking longer and growing more expensive, in part because furloughs and other sequestration-related cutbacks have put a severe strain on the government oversight process for civilian shipyards. The Navy says it’s lost a third of its manning for contract management and oversight at its regional maintenance centers, and as a result, it says it’s seen delays for maintenance projects aboard at least five ships in 2013.

“Furloughs and overtime restrictions are disrupting waterfront services and technical assistance to our ships, as well as government oversight of private sector work,” he said. “This will result in maintenance delays and compressed training cycles that will make it difficult to meet deployment schedules and which impact the proficiency of the crews and places more stress on our sailors and their families. The ship operations accounts, which fund the replenishment of spare parts, were also reduced to stay under the mandated caps. As a result, we have seen an increase in material deficiencies and the cross-decking of spare parts, which are early indicators of readiness degradation.”

The Navy admits that it can’t lay all of its maintenance problems at the feet of sequestration. The service now acknowledges it let a decade go by with sub-par maintenance procedures, in part because of a high operational tempo. The service also traces part of the problem to a 1999 decision to shift toward what was called “continuous maintenance.” The notion was that the Navy could save money and make its fleet more available for tasking by the miltiary’s combatant commanders by performing more work while ships were in the water, as opposed to placing them in drydock or at a pier for more comprehensive overhauls.

That has led to what the Navy now estimates to be a $2 billion backlog in deferred maintenance. It’s asked for more than $300 million next year to begin chipping away at the problem, which Rowden chalked up to poorly-defined requirements for what the Navy needs to do to keep its surface ships running as long as their builders intended.

“We now have a good engineered requirement, and I’m confident that the money that we say we need to reset the force truly is what it is we need,” he said. “The trick will be to continue to keep that on track. One of the problems that I foresee is if we delay the execution of that maintenance, as time goes on, the price to accomplish that maintenance increases in a greater-than-linear fashion. And so we really have to get after that reset maintenance on our ships, so that we can preserve them to their expected service life and maintain the fleet. If we don’t get after that, then we might have to look at having to decommission ships early because of the increasing costs, and that will reduce our fleet as we move ahead.”

To build the Navy’s new cost estimates for maintaining its surface fleet, Rowden says his office borrowed methodologies from the Navy’s nuclear submarine community, which famously, does not cut corners.

“What we did was we pulled the processes that the nuclear power portion of our Navy does in order to determine their real requirement, and we instituted that in the surface Navy. And when we instituted that, it allowed us to very succinctly get at exactly what the costs were,” he said. “And so I’m confident, given the fact that we have now been executing this process for about three years, that we do know the condition of our ships, and we have a good understanding of how to then go determine what funding must be applied.”

But that funding will need to be applied to shipyards — both public and private across the U.S. — and the Navy says the technical expertise in those yards is also under threat, because of sequestration, and because of the on-again- off-again nature of the work in those yards in recent years because of ongoing continuing resolutions.

“These are perishable skills. These are skilled artisans we’re talking about here,” Matthews said. “These are pipefitters and welders and electricians that take years to develop, and if they’re laid off, I would expect them to go find employment elsewhere. So if we’re talking about reconstituting that capacity, we’re talking about taking in apprentices and years in the making for those kind of skill sets that are required to work independently in a shipyard. So, while it would be difficult for me to project a cost, we can certainly project a reduction in capacity as a result of that.”

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