Councillors voted in a closed session during the recent meeting not to bid on the 1885 building.

Mayor Reg Kidd said it was a case of "don't look at a gift horse in the mouth".

"We haven't got that sort of money to spend on a building, but if we got the building bequeathed, that's a different story," he said.

"There would be costs to make it comfortable and usable."

Instead, a letter was sent to Premier Gladys Berejiklian from Cr Kidd and copied to Deputy Premier John Barilaro and western NSW parliamentary secretary Rick Colless, asking to reconsider auctioning the site.

"The gifting of such buildings to regional communities is consistent with recent land transfers in Bathurst including prominent buildings such as the old Bathurst TAFE and the Bathurst Ambulance Station," the letter said.

"Opportunities [for community use] have not been tested with the Orange community."

Cr Kidd said there was strong interest in the site.

Property NSW previously defended putting the Lands building up for auction, saying buildings worth more than a certain amount could not be divested to councils and no expressions of interest had been received from Orange City Council.

However, the council confirmed contact was made via Crown Land Negotiations and the Orange Local Aboriginal Lands Council used the same avenue. 

Meanwhile, OCTEC Limited has expressed an interest in the building, although the decision to bid at auction will need to be made by the board. 

The not-for-profit already owns notable heritage buildings in Orange, including the former town hall and Croagh Patrick, and has restored them to their former glory. 

Chief executive officer Andrew McDougall said it could be a good community resource.

"It's in the CBD area and it would be a good investment," he said. 

The 3000 square metre site on the corner of Kite and Anson streets is due to go under the hammer on March 5.