It is crazy. I believe their thinking though is that people have different opportunities, so you should have basically risen to the top at whatever place you were. Yes it is nonsense!
I could objectively be better at math than John from another school. But MY school is extremely competitive, so I'm probably in top 20%. But John doesn't have much competition in his school, so he might be in the top 10% in HIS school. But your system will reject me because I'm in the top 20%, and probably accept John because he's in the top 10%. Total absurdity!