02/14/2012 11:57 am ET | Updated Apr 15, 2012

Unleash the Privateers

A privateer is a private person or ship that has been authorized by a government, by letters of marquee, to attack foreign shipping during wartime. Privateering was a way of mobilizing armed ships and sailors without having to spend public money or commit naval officers to conflicts.

During the 16th century our nation was dependent upon the privateers in our war against the attentions of Spain. In the main they were rogues and vagabonds who were barely controlled by the state; far more interested in looting for their own benefit than progressing the needs of the nation. However, they were of enormous utility during a time of need and England remained free. These privateers employed innovation, daring and superb seamanship to "singe the king of Spain's beard" at Cadiz and defeat the armada.

Later in our history when we faced hardship through war or depression it was this same spirit of unfettered innovation that paved the way to victory or affluence. New inventions were developed on spec and embraced wholeheartedly by a desperate nation. Men literally took to their sheds and invented, and this is what led to the diversity of response that proved so effective.

You might consider this a rather dramatic backdrop to a discussion about our parlous economic state. Out here however, it is beginning to feel more and more like a siege, so I do not think it out of place.

I have heard senior political figures say repeatedly that the path to economic recovery is in the hands of the small and medium sized business. They correctly highlight how these small entities have the flexibility and creativity to replace the hundreds of thousands of public sector jobs lost, and yet to be lost. Yet when we see contracts awarded it is to the same old colossal, usual suspects.

The small and medium sector, our privateers, remain becalmed by the lack of bank finance and unable to join the battle.

Those of you who have been kind enough to follow my blogs will know by now that I don't raise an issue unless I have a suggestion. This occasion is no different. And yes, I am indeed suggesting that we unleash the privateers.

Government must show a real commitment to engage and support the SME sector -- and in more than just words. The lifeblood of SMEs is a full order book. And to make the most of this enterprising sector, new orders and projects should by default encourage innovation.

In practice the government must approach procurement with a broader brush; one that specifies desired outcomes rather than activities. The contracts should be broken into smaller elements to encourage participation by the SME sector on an equal footing. Otherwise, as a small business that sub-contracts from a large provider, innovation is throttled by the inflexible brief of a fixed job specification.

Public sector purchasing and contracting should be decentralized as much as possible; embedded into every large national contract should be a requirement for an access officer to ensure participation by SMEs.

The government could go even further and issue letters of credit against purchases and orders placed to support cash flow. Cash flow makes or breaks a business, and a healthy one promotes employment.

And should the almighty banks get sniffy about giving facilities to SMEs on the basis of a government letter of credit, we should withdraw the support that the nation is giving them. It simply is not worth it.

We live in a modern world. The privateers can and should be an asset to the state. I am confident that it is safe to unleash them yet again, put some wind in their sails and reap the benefits.