In UE5/Engine/Source/Programs/AutomationTool/AutomationTool.proj the script searches for engine dependencies using this:
<CreateItem Include="@(EngineSearchDirs->'%(FullPath)/**/*.Automation.csproj')"
However for individual .uprojects it omits the ‘**’ and only searches:
<CreateItem Include="@(UProjectDirs->'%(FullPath)Build/Scripts/*.Automation.csproj')">
Changing it to:
<CreateItem Include="@(UProjectDirs->'%(FullPath)Build/Scripts/**/*.Automation.csproj')">
seems to correctly build the dependencies for us (it does require you to leave them in build/scripts but now you can have subdirectories)