SJ,
IIRC you are playing with no maintenance. I think pirates should pay at least normal maintenance, tough to get parts, or at best 5-10% less. This would give them an incentive to keep the fleets small but powerful.
In a Last man standing game the Pirates really should not be able to win but they should be fun to play
Don't know how you could get a Pirate victory if no one wins? Have to look at the victory conditions a little closer, I always play Last man standing like the rest of the players seem to do.