[Updated 4:30 pm] WASHINGTON: The US Navy has decided to scrap the fire-ravaged USS Miami, whose repair bill from arson had soared to $700 million from $450 million. It’s the first time the Navy has written off a damaged sub since the USS Bonefish burned in 1988, and it brings the attack submarine force down to 54 subs. The most cost-effective way for the country to make up for the loss of the nuclear-powered Miami is to keep the rest of the fleet well-maintained and to keep buying two new Virginia-class submarines each year, the Navy’s director of Undersea Warfare said this morning.

While cost-effectiveness may be the primary factor behind the Navy’s decision, that hardly means sequestration and budget toplines don’t matter. “The Navy’s decision to inactivate … Miami reminds us of the razor-thin margin for error facing the Fleet due to sequestration and two-decades of under-investing in American Seapower,” fumed Rep. Randy Forbes, a major sub-force advocate and chairman of the House Armed Services subcommittee on Seapower, in a statement this morning. “We are currently facing a self-inflicted readiness crisis, with sequestration forcing maintenance deferrals and, in the case of the Miami, the inactivation of a vital naval asset.”

Rear Adm. Richard Breckenridge made clear he was not begging Congress for more money to repair the Los Angeles-class attack submarine, which was commissioned in 1990 and would have had another ten years and five deployments of service life. The Navy said in a statement last night that it had decided “to inactivate USS Miami due to limited funding from sequestration cuts” – a point quickly picked up by opponents of the automatic spending cuts like Forbes. When pressed by reporters this morning, however, Breckenridge said the Navy would probably have made the same decision given the growing size of the repair costs.

“[Fiscal Year] ’14, even without the effects of sequestration, already presents itself as a very challenging year for the Navy and for maintenance,” Breckenridge said. When the Navy thought Miami could be restored to service for $450 million, not all of which would have to be spent in a single year, it was possible to squeeze it in. But then Navy estimators found $50 million in additional damage. Then came another $50 million increase for moving some work from the short-handed Portsmouth public shipyard — where sequester had imposed a hiring freeze and limits on overtime — to private-sector sub builder Electric Boat. Finally, after in-depth studies of how past submarine repairs had overrun their initial budgets, estimators increased the contingency fund for Miami from $50 million to $150 million in order to cover what Breckenridge called “unknown unknowns.” To justify spending $700 million on a single sub – $390 million of it in 2014 alone – is, said Breckenridge, “difficult in light of other priorities that are also getting squeezed, even if the money was available.”

Hypothetically, Breckenridge said, “Congress could’ve come and found a way to find that $390 million in FY14… but again, it flies in the face of [the needs of] other pressurized maintenance accounts.” The money required for Miami could have instead gone to maintenance on “dozens” of other vessels. For example, Breckenridge said, paying to repair the Miami would have forced the Navy to defer maintenance on another aging Los Angeles-class sub, the Alexandria. Now Alexandria can be overhauled on schedule in 2014 and go back to sea in top condition.

Keeping other subs in shape and on duty, however, only goes partway to make up for losing Miami. The most important part of the solution, Breckenridge said, is to keep building two Virginias a year at New England’s Electric Boat (run by General Dynamics) and Virginia’s Newport News (run by Huntington-Ingalls). That’s a pace of production that Congress has supported, so far, but not without qualms about the cost. “That’s a big investment,” the admiral acknowledged. “Maintaining two-per-year Virginia [production] is always threatened in tight economic times.”

It’s important to “keep that machine rolling,” Breckenridge said. “There’s not any other levers I have to fix SSN [nuclear attack submarine] force numbers to compensate for losing Miami’s ten years of life.”

Breckenridge didn’t run the math, but by our back-of-the-envelope calculations, it’s not very cost-effective to spend $700 million to get 10 more years – $70 million a year – out of the ’90s-vintage Miami, considering that the Navy can get a brand new and more advanced Virginia with 33 years of service life for $2.6 billion – $79 million per year. (The Navy prefers to say a new Virginia costs $2 billion, which would reduce its cost per year of service life to $61 million, below the cost-per-year of a repaired Miami, but we’re sticking with the more comprehensive figures from Ron O’Rourke, naval expert par excellence at the Congressional Research Service).

Such cost comparisons aide, part of the Navy’s 2014 crunch is the amount of work deferred from 2013 because of the sequester and the continuing resolution, Breckenridge said, both due to funding shortfalls and to sequester-induced slowdowns in the pace of repair work. “There’s a lot of maintenance that became subject to the pressures of a tight budget in ’13 that have rolled into ’14,” he said.

Even before sequester, however, the Navy in general suffered from a decade-plus of increased deployments and deferred maintenance since 9/11. Surface ships like cruisers and destroyers have fared the worst, with an estimated $2 billion backlog, but subs are not immune. “We are probably in a little healthier state with our submarine maintenance than with our surface ships,” said Breckenridge. “I don’t have as much of a backlog. That said, we’re wrestling every year under this more austere budget climate to keep on schedule without a ripple effect [of delays] on our submarine force.”

“Things are tight all over,” the admiral summed up.

Taking Miami out of service won’t be free: The Navy estimates it will cost $54 million, on top of the $50 million already spent on clean-up and on the preliminary repair work that showed a full repair would be unaffordable. But, said Breckenridge, “we’re committed to the decision.”

“Not only was this a heart-wrenching decision to me, but it was a personal decision,” Breckenridge told reporters. “I was the [Submarine] Group 2 commander in charge of Miami at the time the arsonist set the fire. I drove up through the night to arrive at the Portsmouth shipyard at four in the morning…. In the day after the Miami fire, I was able to go below decks [and] walk around that eerie hulk with just the charred burned out remains.”

“At that time we along, with our congressional leadership – particularly from the New England area, made a commitment… that we were going to overcome this setback and restore Miami to service,” Breckenridge said. But the costs kept going up.

As of now, “we are on the path for inactivation,” the admiral said. “I don’t expect us to turn back.”

Updated 4:30 pm with additional information from the Navy on submarine numbers, Portsmouth shipyard shortfalls, and the history of the USS Bonefish. Updated 2:00 pm Thursday with more precise figure for inactivation cost ($54 million vice $50).