Sec. 1. 5 MRSA §1746, as amended by PL 1989, c. 483, Pt. A, §19, is repealed and the following enacted in its place:

§1746. Retainage in public construction contracts

1.__Definitions.__As used in this section, unless the context otherwise indicates, the following terms have the following meanings.

A.__"Designer" means the architect or engineer designated by the contract documents to design the work or to provide contract administration for the owner.

B.__"Punch list" means an inventory of work that remains deficient or incomplete after substantial completion.__ "Punch list" includes reasonable estimates of cost for correction or completion of the work contained on the list.__ Deficiencies discovered after acceptance of the work are not punch list items but may be covered by warranty or contract obligations.

C.__"Substantial completion" is the stage in the progress of the work when the work or designated portion of the work is sufficiently complete in accordance with the contract documents so the owner can occupy or utilize the work for its intended use.

2.__Retainage.__In a contract awarded for a public improvement, the public owner may retain 5% of the money due the contractor until substantial completion of the work.__At substantial completion, the owner and the contractor shall inspect the work and prepare a punch list.__The owner may thereafter withhold for defective or incomplete work only those funds that are sufficient to account for 1 1/2 times the value of punch list work.__As punch list work is completed, the retainage held by the owner must be correspondingly reduced.__Funds may not be retained in anticipation of warranty claims but may be retained as directed by contractor's surety or as necessary to account for liquidated damages or other contract defaults as determined by the designer.

3.__Designer's role.__Issues between the contractor and the public owner concerning substantial or final completion or concerning the scope or cost of punch list work and any other questions necessary to determine when retained funds are due to be released must be promptly resolved by the designer, whose decisions are not binding by virtue of this section for any other purpose.