I'll better explain this with an example.
Imagine Mr. X as PWD engineer. According to assurances of politicians to public, construction of a highway within a region will be taken up.
Now, it is the responsibility of Mr X to take up the construction activities. Now to do this construction, no government servants are available readily. Bulldozers, rollers, laborers..not readily available. Hence the project will be awarded to a contractor. Just like you give contract for construction of your house to a mestri or an Engineer. Except here Mr X cannot directly award the contract to any contractor according to his/her wish and will (quite practical huh!).
So what Mr. X does is, he/she will call for a tender through newspapers and/or online for the construction of highway. Tender is a document, in a very general sense, indicating money that Mr X is ready to spend on construction of highway. He will quote the max amount.
Now different contractors will "bid"? their amount (based on their infrastructure and technologies) to the above mentioned project and (technically. Ahem!) project will be awarded to that contractor who quotes lowest bid (less than tender amount obviously).
All government civil engineering projects like govt schools, hospitals,dams,road....any construction activity runs on same lines. This is very very generalized answer. there are quite many other factors involved in this.