(a) If the prime contractor on a public construction or public works contract, after making a request for payment to the state or political subdivision but before paying a subcontractor for the subcontractor's performance covered by the payment request, discovers that part or all of the payment otherwise due to the subcontractor is subject to withholding from the subcontractor under the subcontract for unsatisfactory performance, the prime contractor may withhold the amount as allowed under the subcontract. If the prime contractor withholds an amount under this subsection, the prime contractor shall
(1) give the subcontractor a notice complying with AS 36.90.240 as soon as practicable after determing the cause for the withholding but before the due date for the subcontractor payment;
(2) give the contracting officer of the state or political subdivision a copy of the notice furnished to the subcontractor under (1) of this subsection;
(3) pay the subcontractor within eight working days after correction of the identified subcontractor performance deficiency.
(b) If the prime contractor does not comply with the notice and payment requirements of (a) of this section, the contractor shall pay the subcontractor interest on the withheld amount from the eighth working day at an interest rate that is equal to the amount set out in AS 45.45.010(a).
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