Peel potatoes; place in a large saucepan and cover with water. Bring to a boil. Reduce heat; cover and cook for 30-40 minutes or until tender but firm.
Meanwhile, in a large skillet, cook the bacon over medium heat until crisp.
Remove to paper towels; drain, reserving 3 tablespoons drippings. When cool enough to handle, crumble bacon; set aside.
In the drippings, saute onion and celery until tender. Stir in flour, sugar, salt and pepper until blended.
Add water and vinegar. Bring to a boil; cook and stir for 2 minutes or until thickened.