Sec. 2. (a) Section 1 of this chapter does not apply to the following:
(1) Interagency or intergovernmental transactions.
(2) Amounts payable to employees or prospective employees of state agencies or political subdivisions as reimbursement for expenses.
(3) Claims subject to a good faith dispute, if before the date of timely payment notice of the dispute is:
(A) sent by certified mail;
(B) personally delivered; or
(C) sent in accordance with the procedure in the contract.
(4) Contracts entered into before September 1, 1983.
(5) Contracts related to highway or road construction, reconstruction, or maintenance, if:
(A) the Indiana department of transportation authorizes partial progress payments under IC 8-23-9-14; and
(B) each progress payment does not exceed five hundred dollars ($500).
(6) Claims, contracts, or projects that are to be paid for exclusively with federal funds.
(b) As used in subsection (a)(3), "good faith dispute" means:
(1) a contention by the state or political subdivision that goods delivered or services rendered were:
(A) of less quantity or quality than ordered or specified by contract;
(B) faulty; or
(C) installed improperly; or
(2) any other reason giving cause for the withholding of payment by the state or political subdivision until such dispute is settled.