In the next 30 years, the American population will rise by 70 million people. This being the future, those people will love ordering stuff online even more than people do now, which will prompt a 45 percent rise in freight volume. The nation's roads, already crumbling because Congress likes bickering more than legislating, will be home to 65 percent more trucks.

That's just one of the ways a report, released earlier this year by the US Department of Transportation, says a growing population will strain an already overloaded highway system. Eager to avert some of these problems and get people thinking about the mobility of tomorrow, today the DOT is launching the Smart City Challenge, a contest that invites American cities to take advantage of new technologies that could change how we move.

Open data, smart gadgets, autonomous vehicles, and connected cars are among the tech already revolutionizing the road, while companies ranging from Apple and Google to Uber and Lyft promise to revolutionize how people and goods get around. The city that offers the most compelling plan gets $50 million to begin making it happen.

The challenge represents a new way of working for the DOT, one tailored to a rapidly changing world. That shift is largely the work of Anthony Foxx, President Obama's secretary of transportation since July, 2013. His job—make the US transportation system as safe and efficient as possible—is the same given to his predecessors. But the tools for meeting that mandate are very much different.

In the next few months, Foxx will speak at CES and South by Southwest—neither of which are common venues for the head of the DOT. "It probably does seem a little weird," he says. "I'm standing on top of one of the crustiest, stodgiest sectors in America." But the world is changing, and he wants the US to be ready.

downtown tucson, arizona, usa Walter Bibikow/Getty Images

Established in 1966, the DOT contains a hodgepodge of agencies, including the Federal Aviation Authority, National Highway Traffic Safety Administration, Federal Highway Administration, Pipeline and Hazardous Materials Safety Administration, and Federal Railroad Administration.

The whole operation—55,000 employees, a $70 billion annual budget—is based on what Foxx calls a "crazy decision-making process." Freight systems are mostly privately owned. Transit systems are locally operated. Highways are the purview of the states. Air traffic control is federal territory. The DOT is not well positioned to keep up with the accelerating rate of technological change. The agency usually takes years to evaluate and approve new technologies. So long, Foxx admits, that by the time it's made up its mind on how to treat something new, that something is often outdated. Meanwhile, American infrastructure is crumbling and we haven't had a long-term transportation funding bill since 2009.

Foxx is making efforts to catch up with new technology using familiar tools. He's pledged to issue a rule requiring the use of vehicle-to-vehicle communication technology by the end of 2016. In October, the DOT announced it will require all drone owners to register their aircraft before flying in US airspace. It's working on an update to the guidance for the development of autonomous vehicles it issued in May 2013. It's considering revising how it issues safety ratings for cars to encourage automakers to offer more active safety systems.

But you can only do so much at the federal level, with rule making and the occasional grant. Cities that want to prepare for a future in which today's transportation methods seem fully antiquated must figure things out for themselves. They know their own problems better than anyone, and they're the ones most suited to find solutions. Foxx thinks the DOT should be there to help, to provide guidance and resources. That's where the Smart City Challenge comes in.

We needed to do something that would basically jumpstart an entirely new, forward-looking conversation about what communities can do to build for the future. Secretary of Transportation Anthony Foxx

American cities are now invited to submit proposals for how they would remake themselves. The challenge is open to medium-sized cities of between 200,000 and 850,000 people, that have a public transportation system of some sort. They should not be part of a larger metro region, so the proposal doesn't have to work in conjunction with other cities. Of the prize, $40 million is coming from the DOT (subject to future appropriations), and the rest is coming from Vulcan, Paul Allen's philanthropic organization.

What the plans should include, however, is open to interpretation. Foxx refuses to offer examples of what he'd like to see, for fear of constraining potential solutions. The competition's meant to spark creativity, after all. "We want to see what comes back to us," he says.

Foxx does offer a list of ingredients and general areas to hit, like vehicle-to-vehicle and vehicle-to-infrastructure technology, autonomous vehicles, and on-demand services. The plan should include ways to improve pedestrian and cyclist safety and use open data, so outside parties can more easily collaborate with municipal powers. Partnerships with those outside parties are encouraged.

It's a bit like describing your dream job: If you could do whatever you wanted, what would that be? You've got $50 million to spend. If you have a lot of residents who'll soon be too old to drive, find a partner to help you launch a self-driving car program for elderly citizens. If you're expecting more trucks on the road, have a plan to deal with that. Expand your bike share program. Build an app that lets people know exactly when their bus is coming. Wire your traffic lights to communicate with cars. Pilot a public transit on demand service.

What's most important is that the proposal be a holistic solution that brings all those elements together, revising the entire system, and addressing specific issues. "We needed to do something that would basically jumpstart an entirely new, forward-looking conversation about what communities can do to build for the future," Foxx says.

"I think it's an amazingly good idea," says Howard Jennings, managing director of Mobility Lab, a Virginia-based research lab (which is funded in part by the DOT). And while $50 million "can get eaten up in a heartbeat" if you're building a rail line or new road, he says, it can go pretty far on projects that don't require new infrastructure.

The challenge follows a brisk timeline, especially by federal agency standards. Proposals are due in February and the DOT will announce five finalists in March. Each of those cities will get $100,000 to further develop their plans, and a final winner will be chosen in June. There's no consolation prize: That city gets all the money. Then it gets to work.

The challenge is meant to prepare all American cities for the future, by starting with one detailed test case. Rather than widely distribute limited funds, give one city what it needs to test out a thoroughly considered playbook, and see what happens. The upshot for cities that don't win, Foxx says, is that they're at least forced to seriously consider how they need to prepare for the future.

What happens after that, though, is fuzzier. The travails or successes of the winning city will be valuable lessons, but not much good to cities without the funds to follow its lead. There's reason for optimism, though: Congress just last week passed a $305 billion, five-year transportation funding bill, and Obama plans to sign it.

With money nearly in hand, it's time to figure out what to spend it on. And if all goes well, the Smart City Challenge will help them along, Foxx says. "I'm looking for something bold."