Bring potatoes to a boil, cover and simmer for 20-25 minutes.
Drain, cool, then slightly mash.
Cook bacon until crisp in a large skillet. Remove, let cool, then crumble. Reserve 2 tbsp of the drippings in the pan.
Add the onion and cook until tender.
Add the sugar, salt, pepper, and flour and blend well.
Slowly add the vinegar and water, stir until the sauce thickens and boils.
Add the potatoes and bacon back in and stir to combine.
Serve.