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From the three and one half percent (3 ½%) retained on any contract executed prior to August 2005, that is being closed and to the extent the funds are due the contractor, the department shall withhold from the contractor a sum sufficient to pay all claims, of which notice is appropriately filed with the department, for a period of sixty (60) days from the date of the last advertising, to allow claimants to sue and prove their claims against the contractor or its agent, in some court of competent jurisdiction. In the event a civil action is brought against the contractor by any claimant within sixty (60) days from the day of the last advertising, the department shall pay the amount of the claim into court from any funds of the contractor the department is holding, if any. But in all cases where civil actions are not brought within sixty (60) days, the department shall pay any sums being held by the department, if any, to the contractor. No civil action shall be valid unless it is filed after the filing of a notice of claim with the department in accordance with § 54-5-122.
On the date set for full and final settlement with the contractor, the contractor may make proper refunding bond to the state for the amount of any sum or sums so held for the period of sixty (60) days, the bond to be approved by the department, whereupon it shall pay the contractor in full.