The idea is that colonies passively produce certain amount of repair points which are first applied to repairing ships and then to upgrading/retrofitting. That much have been told in previous post. Currently ship repair is not yet implemented since no ship damage is carried over after a battle so all repair points go straight to retrofitting. Refit prices are currently simply full ship construction cost and repair points are generated at a rate of 1/5 per employed population (colonist with a workplace) making it 25 times slower then production of a new ship. I intend to revisit the numbers at a later date and make more nuanced cost calculation which takes into account equipment difference so upgrading will be cheaper then scraping and rebuilding ships.
So how does it look like? On design list screen each design has red "x" button (which I should change to something more descriptive) which opens "Refit to" dialog where player can choose to remove design, refit to other design or keep the design (cancel removing or refitting).
As with other things in the Stareater, nothing permanent (except exceptions) happens before ending a turn. Marked designs are removed at the beginning of a next turn if there are no ships of that design. If there were technological advancements which unlocked higher level of ship components then upgraded designs will automatically be added and older designs will be marked obsolete and set to refit to new design. That automatic upgrade order can be changed by player but only by selecting non-obsolete design to refit to. Building queues also get changed in the process, swapping obsolete designs ship orders with their upgrades.
I think that's enough for new preview build.