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Who would have thought that the Post Office, once a byword for bureaucracy, would be at the forefront of a new drive by large companies to get the most out of their external lawyers?

But with the recent announcement of swingeing cuts to its panel of law firms reduced from 40 to just four the Post Office is doing exactly that.

While granting the lucky four firms Eversheds, Dibb Lupton Alsop, Weightmans and Bond Pearce three-year contracts, it has, in return, placed exacting and unusual demands on them.

These innovations include insisting that the firms share information not just with the Post Office but also the other law firms on the panel.

Under normal circumstances, firms would expect such information to be part of a competitive advantage over their rivals.

Catherine Churchard, director of legal services at the Post Office, said the fact that the chosen law firms "were committed to teamwork with us and each other" was a major factor in winning the work.

The Post Office's aim is to get a consistent service across the country in the absence of a truly national firm one where the product does not vary in quality from office to office.

Mike Ball, employment partner at Weightmans, said the idea was that if one of the firms developed a particularly effective way of dealing with a type of work, the Post Office would expect this to be taken up by all the firms.

If, for example, one of the firms' employment teams gained insight into how an industrial tribunal was dealing with a particular area of law of general interest, then that firm would be expected to pass that information on to the other firms.

Other Post Office demands include requiring solicitors to attend an annual conference to discuss progress.

The firms will also be subjected to "difficult" objective performance standards, such as standard response times to enquiries and specified times before a hearing by which the external solicitor must contact the client.

These developments come as no surprise to other in-house lawyers. Tony Kwasnick, who is currently looking at the best way to rationalise Barclays Bank's legal services, said: "Companies are managing the relationship in a much more hands-on way and have become much more business-like."

He said that law firms committed to acting in the best interests of their client should be happy to share information.

The benefits to the client are obvious if firms are constantly trying to out-do each other with new ideas.

Paul Gilbert, in-house lawyer at the Cheltenham & Gloucester and vice-chair of the Law Society's Commerce and Industry Group, agreed that the management of external lawyers had become a priority for in-house teams.

As an in-house legal department's own resources are squeezed, so it looks to extract as much as it can from its external lawyers.

In management consultant speak the search is on for "added value" from "external service providers" on whom a company may be spending millions of pounds in fees.

Gilbert said that for the Cheltenham & Gloucester, "added value" meant free seminars, training sessions and legal updates for the client's in-house department and other members of staff.

By obtaining Law Society accreditation for these sessions the company can also save money on expensive external courses. Gilbert added that the Cheltenham & Gloucester also expected its own trainee solicitors to be included in the law firms' training schemes for their own trainees.

Secondments, not just from the law firm to the company, but the other way too, are also likely. It is not unusual for the client to require the secondment to be for free. On rare occasions a whole team has been seconded.

The final indignity for the external lawyers is a squeeze on price. One managing partner The Lawyer spoke to said that in some tenders companies were asking for information that would effectively reveal the firms' profit margins and bottom line, putting the companies in a position to negotiate down fees.

In the US, companies' influence over law firms has even reached the stage where chemicals giant Du Pont can require all its law firms to recruit lawyers from the same recruitment agency if those lawyers are subsequently to be assigned to work for them.

Although things have not reached that stage in the UK, the demands being made by in-house departments on their panel firms are placing a significant burden on them.

The incentive for the law firms is that these developments allow lawyer-client relations to be much closer. Paul Taylor, managing partner at national firm Berrymans Lace Mawer, said that this helped create a "much healthier relationship".

For firms lucky enough to be selected to work on a panel, offering "added value" is a price worth paying.