We study a class of models, known as overlay optimization problems, with a "base" subproblem and an "overlay" subproblem, linked by the requirement that the overlay solution be contained in the base solution. In some telecommunication settings, a feasible base solution is a spanning tree and the overlay solution is an embedded Steiner tree (or an embedded path). For the general overlay optimization problem, we describe a heuristic solution procedure that selects the better of two feasible solutions obtained by independently solving the base and overlay subproblems, and establish worst-case performance guarantees on both this heuristic and a LP relaxation of the model. These guarantees depend upon worst-case bounds for the heuristics and LP relaxations of the unlinked base and overlay problems. Under certain assumptions about the cost structure and the optimality of the subproblem solutions, both the heuristic and the LP relaxation of the combined overlay optimization model have performance guarantees of 4/3. We extend this analysis to multiple overlays on the same base solution, producing the first known worst-case bounds (approximately proportional to the square root of the number of commodities) for the uncapacitated multicommodity network design problem. In a companion paper, we develop heuristic performance guarantees for various new multi-tier. survivable network design models that incorporate both multiple facility types or technologies and differential node connectivity levels.