I think the problem is that military rank and faction rank are too often bound together. A lot of the militarily organized factions rightly want the faction chain of command followed, but they do that by tying your progress in the faction to your rank. This ties to the whole equipment thing, because, outside of that idiotic rewrite of Star Trek, you do not give Heavy Cruisers to Ensigns.
In the US Navy, they have Line and Staff officers. Line officers command, Staff officers do not. I think you could do the same thing in factions, by allowing people equipment privileges without giving them command authority in faction activities. Commanders and Captains are a dime a dozen in the military, but they command warships; they do not make policy decisions.
My belief is that, if you are going to have perks, you need to have faction rank tied to things other than whether you can have a given class of ship (snubs v warships). I am not certain what to replace that with, but telling the low ranks that they are not allowed to compete at the same level as everyone else is discouraging to say the least.
