Another important advantage is that the prime contractor can reduce his risk by converting a certain percentage of the risks into subcontractors. But ethically, the prime contractor should not transfer the greatest risks to the subcontractor. The transfer of significant risk can destroy subcontracting organizations. Managing a small workforce will allow them to perform in all market conditions without significant losses. Apart from this, the prime contractors have other advantages in using subcontractors for the execution of the project. The difficulty in any situation is that liability depends on the particular circumstances of the case. Neither the employer nor the contractor is certain about the outcome. Subcontractors engaged directly by customers are called national subcontractors. As part of the appointment process, an agreement is reached between the prime contractor and the subcontractor. The domestic subcontractor has no contract or communication with the customer. However, all domestic subcontractors under contract are responsible for carrying out the work according to the customer`s requirements and the expected quality. The use of subcontractors allows the prime contractor to carry out more complex projects without unacceptably increasing his risk.
However, concerns have been raised about the prevalence of subcontractors, as the prime contractor has less control over the skills and training of subcontractors` employees, which can have a negative impact on local quality and health and safety. between employees with spouses and employees with domestic partners, as well as between domestic partners and spouses of employees. AB-17 applies to contracts performed or amended on or after January 1, 2007,1 requiring government contractors to provide employees with domestic partners with the same type and amount of benefits as employees with their spouses. The same services must also be provided with respect to services offered directly to spouses or life partners. Subcontractors are mandated by the prime contractors to perform part of the work on their behalf. As construction became more complicated and more specialized construction techniques were developed, it became increasingly common for contractors to hire other people rather than employing a large workforce themselves. Some contractors designate subcontractors for the work under a «pay if paid» clause, sometimes referred to as a «pay if paid» clause, where the general contractor works with subcontractors and the subcontractor is only paid when the general contractor is paid for their duties.  Designated subcontractors are appointed if the client wishes to maintain the cost and quality of the work. Apart from this, the designated subcontractors are used if all the details are not designed and provided in the tendering phase. It allows the client to start the project with immediate effect until the design team has completed all the details.
Thus, in the tendering phase (for works that are not available in the tender phase), customers are used provisional sum or sum of the main cost. Some work may require special treatment and experience. And prime contractors will only use a specialized subcontractor when needed. The use of specialized subcontractors ensures the quality of the work. In the event that a State Contractor falsely certifies that it complies with the provisions of AB-17, the Contractor is subject to the remedies and/or sanctions contained in the Public Procurement Code § 10420 et seq., including the nullity of the contract, damages imposed by a State court and/or liability for a misdemeanour or criminal offense. These penalties can be avoided if the crown contractor proves that it has complied with AB-17 or is in the process of complying with AB-17. The Air Transport Association court also reviewed the validity of the order under the dormant trade clause of the U.S. Constitution. According to the dormant trade clause, state and local laws are invalid to the extent that they have the extraterritorial effect of regulating trade that takes place entirely outside the borders of a state. The Court noted that because the order requires municipal contractors to provide non-discriminatory benefits to their employees throughout the United States, it governs the offshore practices of municipal contractors.
The court also rejected the applicability of the market participant`s exception to infringements of the dormant trade clause on the grounds that the regulation went beyond the «area of economic activity» in which the city was involved and therefore regulated trade beyond the city`s borders. As such, the court found that the settlement violated the dormant commercial clause with respect to its regulation of extrastate conduct, which has nothing to do with the objectives of a city contract. Contractors may argue that AB-17 is provided for by ERISA or that it is invalid under the U.S. and California Constitutions or other applicable federal or state laws because it requires employers to provide benefits to domestic partners in the same manner that benefits are provided to employees` spouses. While this new law has yet to be challenged, cases interpreting San Francisco`s Domestic Partner Ordinance may be revealing in determining whether AB-17 will withstand an ERISA preemption challenge, constitutional challenge, or any other federal or state challenge. The first case, Air Transport Association of America v. City and County of San Francisco, 992 F. Supp. 1149 (N.D. Cal. 1998), was introduced by various airlines under airport contracts.