Why don't colonies build buildings?

There is a very common "because it's broken" response that is often given in these cases. I can't say that it's impossible, but there are valid reasons for this to happen that are not related to AI decision making.

The first thing that comes to mind is checking whether the sector has access to enough resources that it can actually build anything. Via the Planets & Sectors menu, you can donate resources to the sector (or to a shared pool used by all sectors), which ensures that your AI governor can build things when it needs to.

As per 5AM's comment, a sector without a governor will also not build buildings.