Fry bacon. Remove slice and drain on paper towels. Reserve 3 TBS of bacon fat in the pan. Saute onions in reserved fat until tender. Add sugar, flour, salt and pepper, stirring until smooth. Add water and vinegar. Cook, stirring constantly, until mixture boils. In a large bowl, combine crumbled bacon and potatoes. Pour hot vinegar mixture over potatoes. Toss lightly and serve hot.