Quarter the baby potatoes and place in pot of water and bring to boil. Boil 15-20 minutes until just slightly softer than fork tender. Drain and place in large bowl.
Place the bacon in a cold pan on medium heat and cook until desired crispness. Reserve the bacon in small bowl to mix into salad right before serving. Reserve the fat for the dressing.
Mix the sour cream, mayonnaise,mustard, 2 tbsp of the fresh chives,the garlic powder, the onion powder,the paprika,2 tbsp. bacon fat, salt and pepper in a blender or food processor and mix until smooth. If the dressing seems to thick add the additional two tbsps.of bacon fat.
Pour the dressing over the potatoes and chill a minimum of 4 hours. Overnight is best.
Right before serving add the reserved bacon and the cheddar cheese. Also add in the additional 2 tbsp. of fresh chopped chives.