This is disturbing and, I think, a twisted form of grade inflation, mixed with the usual suitspeak where words don't necessarily mean what they mean. If an employee is as good as you think they should be, why would you put it at risk of termination?
For the record, I also work in a big company with long product cycles, meaning that the product I'm working on started more than one year ago, and the first public release is planned for next December, so I feel your pain. Luckily our process is a bit more sane and our manager follows our work closely, so I'm getting good ratings (but I wonder if the grade inflation will continue in such a way that "exceeds expectations" now means "subpar employee"...).