This is by design. Work Items in Clarizen are hierarchical.
Under a Project is Sub Project, Milestone or Task.
A milestone is a phase of work with the duration of all of its sub-tasks. Under Milestone can only be task. Under task is sub-task.
You can read more in the documentation here: [url=http://help.clarizen.com/index.php/Creating_a_New_Project#Adding_Sub_Work_Items] about creating projects[/url]