A pet peeve. Ask anyone who has to work with pass/fail why it is there, and they'll tell you, "Liability." Press the issue,and they'll say, "So plaintiff's counsel can't claim a bad shooting because we kept a poor shooter on."
A false theory, IMHO. It would be destroyed in 30 seconds of cross. "Mr. Instructor, is it not true that your agency went to pass/fail to hide the less competent shooters?" Only possible answer: "Yes." Plaintiff's lawyer: "No further questions." Overall, would probably hurt more than help.
I haven't personally seen it debated in court as related to an officer-involved shooting. Fortunately.