B.__"Public improvement project" means the construction, major alteration or repair of buildings or public works owned or leased or hereafter constructed, acquired or leased by the State or any department, officer, board, commission or agency of the State that is in excess of $1,000,000 in value; or the construction, major alteration or repair of school buildings that is in excess of $1,000,000 in value and for which state school construction aid is paid.

2.__Bases of retention.__Payment under a contract or subcontract under a public improvement project may not be withheld except for nonperformance, for known defects or for retainage as provided in this section.__Payment may not be retained in anticipation of warranty defects for which there is no evidence.__As used in this subsection, "nonperformance" includes, but is not limited to, defects in workmanship or materials, failure to perform all of the work specified or delay by the general contractor or subcontractor that causes adverse financial consequences.

3.__Line-item retainage.__Payment and retention of payment on a public improvement project must be based on contract line items.__Contract line items for each project must be identified by the parties prior to the start of the project.__If payment is retained under this subsection, the amount retained may not exceed 5% of the payment for approved work on that line item. Nothing in this subsection obligates an owner to make payment of a contract line item in the case of nonperformance on that line item.__When the owner determines that performance has been completed or corrected for that line item, and has accepted the work on the line item, the owner must authorize release of retained payments at the next regular requisition meeting under the contract and pay in accordance with subsection 7.

4. Retention of final 5% of line item payments.__At the end of the performance period for each contract line item, the owner may retain up to the last 5% of payments due to the general contractor on that line item. The total of any payments retained under this subsection and subsection 3 may not exceed 5% of the value of the line item.__When work on the line item is accepted as complete by the owner, the owner must pay in accordance with subsection 7.

5.__Inspection; substantial completion and payment.__The general contractor shall notify the owner in writing when the project is substantially complete and the owner shall inspect the project.__If the owner agrees it is ready for issuance of the