Place diced bacon in large saucepan with the butter. Cook on medium heat until almost crisp; add onions, and cook 5 minutes. When onions are translucent, stir in water, clam juice and potatoes, and season with salt and pepper. Bring to a boil, and cook uncovered until the liquid has reduced by half. Potatoes should be fork tender. Pour in half-and-half and simmer for a further 5 minutes. Adjust seasoning and add chopped clams just before serving, (otherwise clams will be tough). Garnish with crackers and chopped chives.