Is there an alternative to traditional exams? It seems like the traditional exam model (two midterms at 30% and one final at 40% of the grade, closed book) is flawed. For instance:


Students are not allowed to access resources, whereas in reality they would
Students get only a few minutes per questions, whereas in reality they would get days 
Students are not allowed to collaborate, whereas in reality they
would
Students cram for the exam the day before, and forget what they
learned after the course is over
Students focus on the exam to the detriment of learning the material
and understanding real-world applications 
It is difficult to claim
that the exam score demonstrates mastery of the course material in
contexts other than an exam


But in practice, is it possible to improve on these flaws, without introducing major increases in workload for the instructor? Is there any system of evaluating student performance in an undergraduate course which is an improvement over a traditional exam approach?
One alternative that's been gaining momentum in actual classroom use is standards-based grading (SBG): http://www.fwps.org/teaching/sbe/grading-system/ 

In SBG, the instructor establishes a list of milestones that students are expected to attain throughout the course. The students then can provide evidence of any sort -- within parameters set by the instructor -- that prove they have met the standard. Student evidence of attainment of a standard is marked on a scale usually from 0 to 4 (unacceptable, novice, progressing, acceptable, and mastery -- or something like this) and grades are assigned at the end of the semester based on how many of the milestones have been met at "Acceptable" level or above.  

For example, in calculus, one standard might be "Take the derivative of a second-degree polynomial using the limit definition". A student might show that they know this by doing a problem on a standard timed test. But maybe they don't have it down as well as they should, and on the test their work is marked as a 2 out of 4 (progressing; maybe they got the definition right but did some of the resulting algebra wrong). This isn't the end of the story. Later in the course, the student can show evidence again that they've learned what they need to learn -- for example, they can schedule time in office hours to come work a problem or two to show you they've met the standard. Or maybe take a short quiz in class, or work a problem during unstructured group work time in class meetings, or whatever avenue the instructor allows. 

The point of SBG is that we want to assess students based on what they know, and give them multiple ways to show that they know it. SBG can therefore be a superset of traditional timed testing -- students that do well in timed situations will do fine in SBG, but students who struggle with timed testing can have multiple chances to get their act together, and as long as they can prove they've mastered the material by the end of the course, that is what matters. 

I don't personally practice SBG but I would like to. I'd suggest this blog post by my colleague Jon Hasenbank who is a big SBG proponent: http://profjonh.blogspot.com/2014/02/sbg-mia14.html