To retrofit a design:
1) Research Orbital Dry-docks.
2) Open design manager.
3) Select design to retrofit.
4) Click retrofit button in the bottom right corner.
5) Upgrade the Weapons or Modules on the design.
6) Click the submit retrofit button that has replaced the submit design button.
To retrofit ships:
1) Send a fleet to a planet with a Level 3 naval station.
2) Right-click on the ship to be retrofitted.
3) Click the retrofit button.
4) OPTIONAL: check the retrofit all ships in fleet checkbox.
5) Click OK.