James C. Sanders, head of the Small Business Administration, says Office of Management and Budget chief David A. Stockman is "an embarrassment" to the Reagan administration because of his inability to work with senior administration officials.

"Stockman has no respect -- none -- for most of the good senior managers I have been associated with in the Reagan administration," Sanders said in an interview earlier this month.

Sanders has been particularly incensed since December, when he first learned at a budget briefing with President Reagan of Stockman's plans to abolish his agency. That "shocking" confrontation, he said, made him wonder "what I'm doing here."

Sanders said he has seen former Environmental Protection Agency chief William D. Ruckelshaus and Veterans Administration head Harry N. Walters subjected to similar "public embarrassment." Walters confirmed later that he had had "one major shouting match with Stockman."

Sanders said Stockman was "surrounded by fanatics who have no real-life experience." He added that some senior Stockman advisers were "acting like zombies on some issues -- mechanical prostitutes."

Asked to respond, Edwin L. Dale Jr., Stockman's chief spokesman, said: "All you can say from us is that Stockman will have no comment on this."

After Dale was called by The Washington Post, Sanders said he got a call from a "senior White House official." Sanders asked the reporter to repeat the quotes he had taken down. He reaffirmed them, although he questioned "whether I said, or meant, mechanical prostitutes. That's not a term I remember. Maybe I said something that sounded like that. Zombies is my term." Sanders said the White House had asked him to see if he could get the statements withdrawn and the story quashed.

Sanders, a former insurance executive and a friend of White House aide Michael K. Deaver, came to Washington in 1982 as an associate administrator of the SBA. After Reagan's first SBA administrator, Michael Cardenas, was removed from that job, Sanders was promoted.

Since then, Sanders has worked to reduce the size of the agency and eliminate its direct-loan programs.

"Stockman and I both believe in a free-market economy," Sanders said. "We both disagree with subsidies, with interference. But I believe there are programs in which the federal government can come in and help small businesses succeed. And we have some -- no many -- good people here to run them."

Sanders said the "annual budget-cutting process would go smoother if Stockman had consulted with agency heads. It might not change his mind to listen to an agency head plead his case, but it might make his arguments more coherent when they are publicly aired later."

Although the SBA has vocal supporters in Congress, Senate Republicans earlier this month worked out a budget compromise with the White House that would have abolished the agency and its loan programs and transferred some of its components to the Treasury and Commerce departments. John Sloan, president of the National Federation of Independent Businesses, subsequently worked out an agreement with Stockman that would retain an independent small business agency, but would terminate the SBA's loan programs. Senate Republican leaders accepted the change. Sanders, however, was not included in the talks.

In the initial interview, Sanders said of OMB officials: "They cannot expect to understand the inner workings of all the federal agencies. They cannot continue to deal in micromanagement. They have to arrive at the overall tough decisions in the budget process. But it's one thing to study, teach and listen and evaluate . . . . It's another to impose their will . The issue of Stockman's role is going to surface eventually and steps will have to be taken to curb Stockman's uncontrolled nature," Sanders said. "Continuing to increase the OMB's power is sheer idiocy." OMB officials and Stockman, he said, "treat agency heads as the enemy. We're on the same side as the president. That's why we were appointed. That's why we're here.