A thing that I feel is VERY true is that most "highly selective" colleges and universities probably get a relatively small percentage of "instant admit" applicants and a much larger number of "probably will be successful here" applicants. A higher standardized test score (ignoring some nuance here) is a useful tool for entering the admissions lottery in that second group. It isn't all there is - I see high school grads with good standardized test scores, the default high GPA, and not much or any interesting things otherwise struggle to gain admission at over-subscribed schools.
Switching to actual college coursework, when I have taught undergrad students, I use demanding individual projects (evaluated by oral presentation, demo, and questioning) as a significant part of the course. It mostly doesn't scale as an approach but my (biased) feeling is that for the "middle 50%" of students, it is a valuable and worthwhile effort.
All of this gets really murky and nuanced depending on what your real goals are. Those goals are often quite different depending on perspective.
It was also normal for a double digit % of the students to fail the exam and retake the course (me included).
Its not exactly what people think of as a standardized test, but it ensured all students in the school had the same acceptable level of comprehension on the subject.
That isn't very specific, 10% failing a technical course is very low, 99% extremely high.