<PAGE>
 
                                                                    EXHIBIT 10.2

                          BATCHELDER & PARTNERS, INC.
                     4330 La Jolla Village Drive, Suite 200
                          San Diego, California 92122


David H. Batchelder                                   Telephone: (619) 456-6655
Chairman and Chief Executive Officer                  Telecopier:(619) 456-7969



                                August 27, 1997



Mr. Robert A. Tinstman
President and Chief Executive Officer
Morrison Knudsen Corporation
Morrison Knudsen Plaza
720 Park Boulevard
Boise, Idaho   83712

Dear Bob:

     This is to confirm our understanding that Morrison Knudsen Corporation, its
successors and assignees (the "Company") has retained Batchelder & Partners,
Inc. ("B&P") as its non-exclusive financial advisor with respect to transactions
that the Company may pursue with the Guy F. Atkinson Company of California
("Atkinson"), including the merger, consolidation, combination, reorganization,
recapitalization or acquisition of all or a portion of the stock or assets of
Atkinson (individually or collectively a "Transaction").  "You," as used herein,
shall refer to the Company.

     In connection with our engagement hereunder, the Company shall pay B&P a
retainer fee of $50,000 per month, payable in cash on the first business day of
each month commencing September 1, 1997.  Provided, however, that the aggregate
retainer fee payable hereunder shall not exceed $250,000.  Provided further that
any retainer fee paid to B&P hereunder shall be creditable against any Success
Fee (as hereinafter defined) paid to B&P pursuant to this agreement.

     Further, if any Transaction or series of Transactions is consummated by You
and/or any entity substantially owned by You or any partnership, affiliate or
joint venture of which You are a member (singly or collectively, "Acquirer"),
the Company agrees to pay B&P a fee (the "Success Fee") equal to 1.0 percent
(.01) of the Total Transaction Value.  "Total Transaction Value" shall mean the
aggregate Value (as hereinafter defined) of all cash, non-cash assets, equity
and debt issued or assumed in connection with a Transaction and shall include
the Value of equity and debt securities of any entity created as part of a
process to effect a Transaction.  "Value" shall mean (i) with respect
<PAGE>
 
Mr. Robert Tinstman                 -2-                          August 27, 1997


to cash, the amount thereof; (ii) with respect to marketable securities, the
mean of the average of the bid and ask of such securities as quoted at the close
on their principal trading market on the tenth through the sixth consecutive
trading days ending on the trading day preceding the date of closing of the
Transaction or, if not quoted on such dates, the mean of the average of the bid
and ask of such securities as quoted at the close on their principal trading
market on the five (5) consecutive trading days beginning with the next such
trading day on which a bid/ask is so quoted; and (iii) with respect to non-cash
consideration other than marketable securities, the fair market value thereof as
mutually agreed by the Company and B&P. Any fee pursuant to this paragraph shall
be payable in cash upon closing or consummation of such Transaction or, in the
event that the determination of Value requires market information only available
after such closing, as soon as practicable thereafter but in no event later than
fifteen (15) days after closing or consummation of such Transaction. In the
event that a Transaction is not consummated but the Company receives a break fee
or similar compensation (a "Break Fee"), the Company shall pay to B&P ten (10)
percent of such Break Fee.

     In addition to the foregoing compensation, You shall reimburse B&P for our
reasonable out-of-pocket expenses, which shall include the fees and
disbursements of our counsel.  We shall not incur expenses in excess of $25,000
without your approval, which shall not be unreasonably withheld.

     Since we will be acting on the Company's behalf, the Company is agreeing to
provide us with indemnification pursuant to the letter of even date herewith
from the Company to B&P.  Further, nothing in this engagement is intended to
create an agency or other fiduciary relationship between the parties or any of
their affiliates, directors, officers, partners, agents or employees.  The sole
obligation of B&P hereunder shall be the contractual obligations specifically
created by this agreement.

     Our services hereunder may be terminated by the Company or by B&P upon
written notice and, in any event, shall terminate on December 31, 1998.  If the
Company elects to terminate, no further retainer amounts shall accrue, any due
but unpaid retainer amounts shall be paid and any reimbursable expenses incurred
before the date of termination shall be paid.  Provided, however, you
specifically acknowledge that our services hereunder will have continuing value
to the Company and therefore You agree that if You terminate our services and
within 12 months thereafter, an Acquirer effects a Transaction, then B&P shall
be entitled to compensation pursuant to the third paragraph hereof to the same
extent as if our services had not been terminated.  If B&P elects to terminate,
no further retainer amounts shall accrue and any reimbursable expenses incurred
before the date of termination shall be paid.  Notwithstanding the foregoing,
the provisions of the preceding paragraph shall survive any termination, whether
by the Company, by B&P, as a result of the passage of time or otherwise.

     Except as required by law, any advise (written or oral) rendered by us
pursuant to this letter may not be disclosed publicly without our prior written
consent, which consent shall not be unreasonably withheld.
<PAGE>
 
Mr. Robert Tinstman                 -3-                          August 27, 1997


     Please confirm that the foregoing is in accordance with the Company's
understanding by signing and returning the duplicate of this letter attached
hereto, which shall thereupon constitute a binding agreement.

                              Very truly yours,

                              BATCHELDER & PARTNERS, INC.

 
                              By:   /s/ David H. Batchelder
                                    -----------------------------------
                                    Title: Partner



Confirmed:

MORRISON KNUDSEN CORPORATION


By:  /s/ Stephen G. Hanks
     -------------------------------------

Printed Name:  Stephen G. Hanks
               ---------------------------

Title:    Executive Vice President
          --------------------------------

Date:     October 13, 1997
          --------------------------------



 
<PAGE>
 
                                August 27, 1997



Batchelder & Partners, Inc.
4330 La Jolla Village Drive, Suite 200
San Diego, California   92122

Gentlemen:

     In connection with your engagement as financial advisor to Morrison Knudsen
Corporation, its successors and/or assignees (the "Undersigned") with respect to
the matters contemplated by the letter from you to the Undersigned of even date
herewith, the Undersigned hereby agrees to indemnify and hold harmless you and
your affiliates, the respective directors, officers, partners, agents, and
employees of you and your affiliates and each other person, if any, controlling
you or any of your affiliates, to the full extent lawful, from and against all
losses, claims, damages, liabilities and expenses incurred by you and such other
persons (including reasonable fees and disbursements of counsel) which (A) are
related to or arise out of (i) actions taken or omitted to be taken (including
any untrue statements made or any statements omitted to be made) by the
Undersigned, its associates or affiliates or (ii) actions taken or omitted to be
taken by an indemnified person with the consent of the Undersigned, its
associates or affiliates or in conformity with their actions or omissions or (B)
are otherwise related to or arise out of your activities on behalf of the
Undersigned, its associates or affiliates under your engagement, and the
Undersigned will reimburse you and any other person indemnified hereunder for
all expenses (including reasonable fees and disbursements of counsel) as they
are incurred by you or such other indemnified person in connection with
investigating, preparing or defending any such action or claim, whether or not
in connection with pending or threatened litigation in which you or any other
indemnified person is a party.  The Undersigned will not be responsible,
however, for any losses, claims, damages, liabilities or expenses pursuant to
clause (B) of the preceding sentence which are finally judicially determined to
have resulted primarily from the willful misconduct, bad faith or gross
negligence of the person seeking indemnification hereunder (although it is
expressly intended that the Undersigned will be responsible for any thereof that
result from the negligence, other than gross negligence, of such person).  The
Undersigned also agrees that neither you, nor any of your affiliates, nor any
director, officer, partner, agent or employee of you or any of your affiliates,
nor any person controlling you or any of your affiliates, shall have any
liability to the Undersigned for or in connection with such engagement except
for such liability for losses, claims, damages, liabilities or expenses incurred
by the Undersigned which is finally judicially determined to have resulted
primarily from your willful misconduct, bad faith or gross negligence as herein
described.  The foregoing agreement shall be in addition to any rights that you
or any indemnified person may have at common law or otherwise, including, but
not limited to, any right to contribution.
<PAGE>
 
Batchelder & Partners, Inc.              -2-                     August 27, 1997
 


     It is understood that, in connection with your engagement, you may also be
engaged to act for the Undersigned, its associates or affiliates in one or more
additional capacities, and that the terms of the original engagement or any such
additional engagement may be embodied in one or more separate written
agreements.  This indemnification shall apply to the original engagement, any
such additional engagement and any modification of the original engagement or
such additional engagement in connection with which this letter is expressly
referenced in writing and shall remain in full force and effect following the
completion or termination of such engagement(s).

                         Very truly yours,

                         MORRISON KNUDSEN CORPORATION


                         /s/Stephen G. Hanks
                         -------------------------------------------


Accepted:

BATCHELDER & PARTNERS, INC.


By:  /s/David H. Batchelder
     ---------------------------------

Title:    Chief Executive Officer
          ----------------------------

Date:     September 10, 1997
          ----------------------------