Pretty much standard procedure. I've done some of this myself. I normally know who is ready and deserving of a promotion. Any good manager should know his/her people well enough to build at least a short list at the drop of a hat.
As for a formal procedure, I've never seen one outside of the government/military. I can't see much use for them outside of large organizations. (See above.) A good manager should already have his/her folks mentally racked and stacked based on objective criteria.
Favoritism is a minefield. Best not to go there. While it's best to avoid a situation like this, I've written my best friend a less than stellar performance appraisal (and he agreed with me). If you can't do that, you're in the wrong job.
I've seen positions/promotions created for a specific person. While the job is technically open to others, the likelihood of anyone being selected other than the "chosen one" is remote. While this might sound bad on the surface, the person was an outstanding performer and deserved the promotion in each case.