Attempting to launch clip volume tools throws information message "This action is prevented by capability variable."
Review also Product functionality in DWG workmode in MicroStation Help
Site admin can remove capability from standards.cfg or to any other workspace configuration file.
Note: you can create a debug file to investigate configuration issues as it contains all the variables included in all the configuration files processed by MicroStation. Review this wiki in relation to how to quickly generate a debug file http://communities.bentley.com/products/microstation/w/microstation__wiki/11081.how-to-quickly-generate-a-debug-file
if this capability is not found there, move to option 2
Review if Ms_Workmode=DWG has been set. If so, restablish value to Ms_workspace=DGN
Note: When working in DWG workmode certain MicroStation functionalities are disable so that the file will be compatible with the DWG format.
Normally a part from not being able to use Clip Volumen Tools you will not be able of creating more than 1 design model per file, etc.
Review the link provided Using The DWG Work Mode In MicroStation V8 [CS] also to see what other functionalities are disabled