You should install latest (Feb 2012) FreeArc and replace arc.ini with the attached one.  Then use FreeArc GUI and select max. compression mode and enable checkboxes for srep/precomp compression.  First line in the dialog will show you cmdline options that you need.  Decompression may be performed by unarc.exe and require arc.ini and srep/precomp executables.  It was about using precomp/srep inside arc archives.

You can also use them "outside" i.e. archive files w/o compression (tar/7z -mx0/arc -m0 -dm0), then process this archive with precomp and/or srep and then compress output with 7z -mx / arc -mx.

— Copied from Bulat Ziganshin's post to Encode's Forum,
  which includes an attached "arcini.zip" file

Note that the above post was made April 15th, 2012.  Wikipedia says

• FreeArc was developed by Bulat Ziganshin (author of the post quoted above).
• The last releast of FreeArc was beta version 0.666, released May 20, 2010.
        So where is one to get the Feb 2012 release?
• A "FreeArc Next" version is under development, with version FA 0.11 released in October 2016.

The top Google search result for FreeArc is the FreeArc download site at SourceForge.net, but Wikipedia says that this is abandoned.  It seems that the Wikipedia page is not being effectively maintained, as it still links to the (now defunct) encode.ru site.