PREPARATION:

1. Place 1 cup water in large stockpot. Bring to a boil over high heat. Add clams. Cover stockpot; reduce heat to medium. Steam 5 to 7 minutes or until clams start to open. Remove clams from stockpot as they open. Discard any clams that remain unopened.
2. Remove clams from shells. Chop clams; set aside. (For shucked clams, drain and chop clams; set aside.)
3. Cook bacon in large saucepan over medium-high heat until crisp. Remove bacon to paper towels, leaving drippings in pan. Crumble bacon when cool enough to handle.
4. Add onion, celery, flour and garlic to bacon drippings and cook over medium heat, stirring occasionally, about 2 minutes or until vegetables are crisp-tender. Remove from heat.
5. Add potatoes to onion mixture. Stir in remaining 1-1/2 cups water, bay leaves, salt and pepper. Bring to a boil over high heat. Reduce heat to medium-low; simmer, uncovered, until potatoes are tender, about 10 minutes.
6. Stir in half-and-half, milk and chopped clams; heat through over medium heat, stirring occasionally. Discard bay leaves. Stir in bacon. Serve with oyster crackers, if desired.