Ad agencies increasingly rely on secret weapon - freelance talent.

A few years back, the head of a big advertising agency in Los Angeles who had just finished making a presentation for a potential client spotted the head of a rival agency sitting in the client's waiting room.

The two men looked at each other for a moment, realizing for the first time that they were competing for the same account.

"May the agency with the best freelancers win," the fast man said to his opponent.

This story is told by Murray Kalis, chairman and creative director of Kalis & Savage Advertising in Pacific Palisades, who was present during the above exchange. It's a telling example of the advertising business in the '90s, as more creative people drop out of the corporate agency game to become contractors - and agency heads move to slash overhead by cutting permanent employees.

Freelancing has always been an important part of the ad biz. But agency heads agree that the proportion of the workload going to freelancers at most big agencies is now higher than ever. And all indicators suggest that the amount of freelancing will continue to rise.

Along the way, it's possible that something very important is lost: an agency's identity.

Advertising people, after all, know better than most the importance of a consistent, identifiable brand image. If the same freelancers are doing creative work for several different agencies, what's the difference between one agency and another?

"The heads of agencies really don't want to admit (to using freelancers)," says Michael Agate, president of West Hollywood-based advertising consulting firm Select Resources International. "They would prefer that their clients not know about it."

Sometimes, though, the truth surfaces in embarrassing ways. Like when a freelancer does too good a job.

Three years ago, West L.A.-based BBDO West made a commercial for Pioneer Electronics (USA) Inc. that shook the industry, literally. You may remember the spot: It started off with speeded-up news footage of a suspension bridge in Washington swinging wildly in a storm.

But then the camera zoomed to show a young man in a sports car driving across the bridge, with the volume on his Pioneer car stereo turned so high it was rocking the span.

The spot was acclaimed by advertising critics, and swept up some of the industry's highest accolades - including the Grand Clio for TV advertising, a Gold EFFIE and a Belding bowl. But all this recognition created a dilemma for BBDO, because creative work on the commercial was actually led by two freelancers.

Court Crandall and Kirk Souder, who were just launching their Ground Zero agency in Santa Monica when they were hired to create the Pioneer spot by BBDO in 1993, found themselves in the rather uncomfortable position when the awards started coming in.

"Things got kind of ugly," says Crandall. "It became this issue where they were trying to explain away why they hired someone else to do the work. And meanwhile, we wanted the credit for it."

Industry experts disagree about whether all this freelancing is good or bad for the business as a whole, or for individual agencies.

Agate points out that excessive reliance on freelancers creates many risks for an agency. It's difficult for a campaign to have consistency when the creative forces behind it may not be available from one month to the next. And ad campaigns involve a lot of confidential business information about a client, information that cannot be effectively guarded when it's spread to freelancers.

"One of the problems with freelance people is, you can't control them," Agate says. "They could get a full-time job next week, or they could be doing freelance work for somebody else next week."

David Park, president of the West L.A. office of DDB Needham Worldwide Advertising and an active leader of industry associations, admits that the reliance on freelancers is growing, but he downplays its significance.

Very few agencies rely extensively on freelance work, Park says, because most ad executives recognize that having a core staff to manage accounts is critical.

"Freelancers are augmentations for a core strength, not a substitution for it," Park says. "It does not build relationships, and it certainly does not build brand continuity."

Others think the increasing reliance on freelancers may be a healthy change for the industry. Kalis, whose Kalis & Savage does not rely on contract workers any more frequently than most agencies its size, believes that eventually the ad industry will work more like Hollywood - in which nearly all the creative work on films is sent to outside production companies, while studio executives finance and distribute the finished product.

Kalis believes agencies would still be able to maintain their own brand identity under such a system - just as movie studios like Wait Disney Co. or Paramount Pictures maintain their own corporate identities.

"The agency still has its own character," Kalis says. "There are certain people they'll hire and certain people they won't, whether the people are staff or freelance. And you can take the same freelancers and put them with different agencies, and they're going to do different work."