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SBA Struggles as Citigroup, AIG Hog Money

Stocks in this article: BAC C AIG

WASHINGTON ( TheStreet) -- When asked how the government is helping small-business owners, Karen Mills cites "the three Cs." "Contracting" and "counseling" are making strides, the head of the Small Business Administration says. But "capital" has been stymied as large banks and insurers such as Citigroup (CITI), Bank of America (BAC) and AIG (AIG) have received billions of dollars in bailouts to the detriment of smaller companies.

The SBA must ensure that 23% of government contracts go to small businesses, which amounted to about $100 billion last year, says Mills, who took the helm in April. The organization under Mills' regime also has been pushing the idea of regional economic clusters, partnerships of small manufacturers and big businesses, government agencies or academic institutions. Those are designed to spur economic growth, such as helping suppliers find new connections in new industries -- those in military defense, for example -- in the wake of the auto industry's downward spiral.

"Regional economic clusters are a very effective way to get small businesses to group together and get economies of scale that they lack just because they're small," Mills says. "We should not forget how much opportunity there is in manufacturing."

Meanwhile, Mills says she has seen a 7% uptick in the SBA's counseling services, such as the mentor/protege program in which a big company takes a disadvantaged firm under its wing so the two can compete for government contracts together. Granite Construction (GVA) last month agreed to mentor contractor HydroTech Inc.. Northrop Grumman (NOC) and Raytheon (RTN) have mentoring relationships with parts manufacturers.

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