Who reviews the proposals and decides?
Varies by agency. In mission agencies (like DOD or NASA) the person who wrote the topic gets the loudest voice, sometimes alone. More usually, 3-4 technical experts review and create an order of merit list which then goes before a committee or before a more senior person. In the non-mission agencies (like NIH and NSF) a committee of outside peer experts, typically academics, review the proposals and recommend the order of merit.