Wash potatoes; pare thinly and remove eyes. Heat water to boiling and cook until tender. Drain; set aside. In large skillet, fry bacon until crisp; remove and drain. Cook and stir onion in bacon drippings until tender and golden brown. Stir in flour, sugar, salt, celery seed, and pepper. Cook over low heat, stirring until bubbly. Remove from heat; stir in water and vinegar. Heat to boiling, stirring constantly. Crumble bacon. Thinly slice potatoes. Carefully stir bacon and potatoes into hot mixture. Heat through, stirring lightly to coat potato slices.