J1317 -- congrats on the first, albeit very important first gate.
I agree with falconchic88 in that each SA (USNA, USMA, USAFA, USCGA, USMMA) is a little bit different in how they do it, as is each ROTC -- sorry, just the way that it is . . . the nuances in the differences can become important (one example . . . the medical waiver authority for USNA and USMA is the Superintendent, not so for USAFA.)
The numbers . . .
. . . approximately 14,000 folks start an application each year for each of the "the Big Three" SAs . . . USNA, USMA, USAFA . . . approximately 10,000 of the 14,000 applications started are "completed" . . .
From the 10,000, approximately 4,000 candidates receive a Congressional nomination.
The SA typically determines around 2400 of the 4000 Congressionally nominated to be "qualified academically and in physical aptitude".
The SA chooses from that 2400 to fill the 1200 slots for a class.
500 or more go to the Principal Nom/#1 off the MOC Slate;
200 or more go to LOA/recruited athletes/Prep School leaving about 350 to 500 slots to be drawn from the remaining 1700 or so that are remaining out of the original 2400 . . . Obviously these are all approximations and not hard quotas . . .
The SA then chooses the 350 to 500 candidates from the remaining 1700 that best meet the needs of the SA to round out the class. (Notice I didn't say the SA chooses the "best" 350 to 500 candidates from the remaining 1700.) Geographic diversity along with other diversity factors come into play (gender, ethnicity, etc.) in order to have a class that best represents our society and our military make up.
It happens every year that candidates with qualified, but lesser records, are chosen over candidates with better records. All 2400 identified by the SA from the 4000 nominated are deemed "qualified" and worthy. It comes down to a subjective judgment in some cases to who gets offered that appointment.
A lot of great candidates don't get an offer of appointment. If the SA's could, they'd take all ~2400 that are determined to be "qualified academically and in physical aptitude", but they can't. Due to the geographic factor, there will be candidates that are Principal Noms or #1 from a MOC's slate (say Idaho) whose record is not as good as the candidate that is ranked #10 from a different extremely competitive congressional district (think Northern Virginia). The Principle Nom/#1 from a MOC's slate (from Idaho) will get an appointment, and the #10 (from Northern Virginia) with the better record from a different Congressional district will not. (This is one explanation why every year there are candidates that get offered a SA appointment but are told they do not qualify for a 4yr ROTC scholarship, and why each year there are candidates that earn a 4yr ROTC scholarship that aren't offered a SA appointment. It typically takes a "SA quality" record to get a 4yr national ROTC scholarship, but the ROTCs tend to be more strictly merit based without the geographic factor.)
Everyone offered an appt is qualified. If you (or your DD/DS) get an SA appt, be grateful. In some ways it is a lotto ticket. The admissions office have rules they must satisfy and they work hard to compile a class that complies with the rules and goals they have been given.
The SA (and ROTC National Scholarship) process is a difficult process. Be proud if the DS or DD is in the final ~2400 deemed "qualified academically and in physical aptitude" by and SA, and/or have received a 4 year ROTC scholarship. They have made quite the "national" cut. Not making it into the final 1200 for an SA appointment is not a reflection on them. It is the SA selection process.