Factory was confirmed upgraded but the button to switch to Tech 2 units in the factory was still greyed out. Snow Blind mission. Occurs whether using shared armies or not using shared armies.
as you can see above it is a T2 Factory but the button to switch to T2 is blacked out. I decided to test this while soloing the coop mission from the FAF client and I was able to reproduce it.
Factories and engineers get hung up after mission triggers in coop. Seems to be consistent over all missions. Once an objective is completed and the game forces your camera to zoom on the next objective all your factories and engineers stop building their queues. Only possible correction is to completely stop production or delete the queue and give it a new order. Even that fix is inconsistent at times unfortunately.