We study a class of models, known as overlay optimization problems, co
mposed of ''base'' and ''overlay'' subproblems, linked by the requirem
ent that the overlay solution be contained in the base solution In som
e telecommunication settings, a feasible base solution is a spanning t
ree, and the overlay solution is an embedded Steiner tree or path. For
the general overlay optimization problem, we describe a composite heu
ristic solution procedure that selects the better of two feasible solu
tions obtained by independently solving the base and the overlay subpr
oblems, and establish worst-case performance guarantees (as a function
of the worst-case bounds for the subproblems) for the composite heuri
stic as well as an LP relaxation of the model. For certain special cas
es, both the heuristic and the LP relaxation have a worst-case bound o
f 4/3. We extend this analysis to multiple overlays on the same base s
olution, producing the first known worst-case bounds (approximately pr
oportional to the square root of the number of commodities) for the un
capacitated multicommodity network design problem. In a companion pape
r, we develop heuristic performance guarantees far various new multi-t
ier, survivable network design models that incorporate both multiple f
acility types and differential node connectivity levels.