Colin goes off on Costello about killing Queenan, because Colin has no way of getting access to the info on Queenan's guys now that Dignam is gone.
Meanwhile, Billy waits outside Madolyn's office until she comes out. She tells him she can't be a friend to him because she's marrying another guy. She apologizes and walks away.
Back at the station, Colin picks up Queenan's phone and calls the last number Queenan called. Billy picks up but doesn't say a word, and neither does Colin. They just listen to the silence for something like ten seconds before Billy hangs up and starts packing his stuff to leave.
A minute later, Billy calls Colin back and Colin explains that he is Sergeant Sullivan and that he's taking over Queenan's unit. Colin wants to meet with Billy, but as you might expect, Billy doesn't trust anyone. He demands to speak to Dignam, but Colin tells him that Dignam is on a leave of absence. Colin says he wants Billy to come in, but Billy hangs up.
As he goes through Queenan's things, Colin realizes that Costello is an FBI informant.