The new bipartisan infrastructure bill gives the federal government much more authority over how transportation money will be spent across the country.

Congress passed the roughly $1 trillion package, one of President Biden’s top legislative priorities, late Friday evening. Typically, transportation funds are allocated via a traditional formula to states based on their populations, gas-tax revenue and other factors. But this bill includes dozens of competitive grant programs—many of them new—in which the Transportation Department...

The new bipartisan infrastructure bill gives the federal government much more authority over how transportation money will be spent across the country.

Congress passed the roughly $1 trillion package, one of President Biden’s top legislative priorities, late Friday evening. Typically, transportation funds are allocated via a traditional formula to states based on their populations, gas-tax revenue and other factors. But this bill includes dozens of competitive grant programs—many of them new—in which the Transportation Department will pick recipients from applications by state and local governments.

That means Transportation Secretary Pete Buttigieg and other top officials will have a greater say in which projects get selected for funding than their predecessors.

All told, about $120 billion of the $550 billion in new spending in the legislation would come in the form of competitive transportation grants. The rest of the new transportation money would largely be allocated via the traditional formula system. The package also includes funds for water infrastructure, high-speed internet and electricity and reauthorizes the regular stream of federal transportation spending that states use for road and transit construction.

“We’ve never seen anything on this scale before,” said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials. “The amount of funding and the total number of new discretionary programs that are being created are unprecedented.”

Mr. Tymon said he expects the grants would direct money to programs that match the administration’s goals, from fighting climate change and improving safety to tearing down urban highways built through historic Black communities.

“The discretionary programs are going to allow the administration to pick the projects that really fit their policy lens,” he said.

Mr. Tymon said states would vie for this money regardless of political orientation.

“All states, regardless of which political party is in power, will apply for grants if they have good projects for those specific programs,” he said. “That being said, if you look at the projects that the previous three, four administrations have chosen for discretionary grants, they tend to reflect the priorities of the administration: rural vs. urban, transit vs. highways.”

To that end, the bill includes provisions guaranteeing wage levels for construction projects, a move that makes it more likely the work will be done by union members. On Saturday, Mr. Biden highlighted that the bill would create “union jobs that can’t be outsourced.”

Ordinarily, Washington lets states decide how best to spend transportation money, giving Congress little oversight once the money is doled out. In the past, most grant programs like the ones in the infrastructure package have been relatively small.

But under discretionary grant programs, Congress can monitor where federal transportation dollars go and call hearings or write legislation if they are unhappy with the results.

“The secretary needs to report back directly to Congress,” said

Adie Tomer, an infrastructure policy expert at the Brookings Institution. The bill “is written in a way that Congress does have direct oversight.”

The legislation sets guidelines for how applicants are to be evaluated, said Jeff Davis, senior fellow at the Eno Center for Transportation, a research group. “But the secretary has a good bit of leeway in interpreting those criteria,” he added.

One advantage of the grants is they can quickly unlock billions of dollars for megaprojects that under the traditional funding formula would have taken years to accumulate.

Under the new bill, Transportation Secretary Pete Buttigieg and other top officials will have a greater say in which projects get selected for funding than their predecessors.

Photo: Craig Hudson/Bloomberg News

For instance, one program offers $5 billion in grants for large-scale projects that would cost more than $100 million to build. Another directs nearly $37 billion to repair bridges.

“There’s a role for these grant programs, especially in areas where we can have a lot of bang for the buck,” said Minnesota Transportation Commissioner Margaret Anderson Kelliher. “The formula money is the bread-and-butter of the program. This is really like the jam.”

Ms. Kelliher has her eye on the bridge grants, which could expedite replacing a bridge between Duluth, Minn., and Superior, Wis.

In Maine, where harsh winters and thousands of miles of coastline makes maintaining infrastructure difficult, officials expect to use the influx of federal money to help offset the added costs resulting from inflation. “It covers the cost increases that have us really worried. Without it, we might have to cut back,” said Maine Transportation Commissioner Bruce Van Note. He said the discretionary programs will help Maine improve less-traveled roads and bridges that often aren’t given priority.

Sending billions of dollars out via grant programs also comes with risk for state and local transportation officials. First, officials say it is impossible to predict whether they’ll win the grants they apply for, making it hard for agencies to draw up long-term plans.

Second, if Mr. Biden isn’t re-elected in 2024, officials say they may find themselves trying to refocus their applications to appeal to the next administration’s priorities. Programs in the bill are funded for five years.

It will probably take at least a year for the Transportation Department to write the rules around the new grant programs, solicit and evaluate applications and send money to the winners, said Mr. Tymon of the state highway and transportation officials association.

The department is also going to have to hire new staff or bring consultants on board, he said, to set up the grant programs and handle the expected volume of applications from state and local agencies.

Mr. Davis, the Eno Center fellow, said there will be pressure on the Biden administration to get money out the door before next year’s midterm elections “to get voters to feel that it was worthwhile.”

—Andrew Restuccia contributed to this article.

Write to David Harrison at david.harrison@wsj.com