From my observations the AI WILL upgrade facilities, but it is lower priority than both ship/unit building and some new facility construction. The retrofits WILL occur but usually not immediately following a design upgrade. I have not figured out how it decides which ones and when to upgrade yet.

If you have yard bases/ships be warned, a bug exists which I have reported that the retrofit minister does NOT check to see whether a ship/base is under construction by the yard to be retrofit. I lost 12 turns progress on each of three defense bases that way.