Orange City Council is set to oppose a bid by the state government body Health Infrastructure, on behalf of the Sale Street site's owners the Health Administration Corporation, to knock the building down.

In a DA submitted to council the government body argued there was so much asbestos scattered through the building by vandals it would be too expensive to save.

However the council officers' recommendation to council's Planning and Development committee on Tuesday night is to save the building but allow for the demolition of a newer part of the nurses' home.

The report said it would cost 33 per cent more to save the building than remove it which was a lot less than the government body had quoted.

"Caldwell House could be successfully remediated and occupied under an ongoing asbestos management plan," the report said.

"Council's expert notes that the building is required to be cleaned [of asbestos] under all the scenarios presented by the applicant."

Heritage architect James Nicholson said he was pleased by council's actions.

"This is a building that is virtually structurally sound," he said.

Mr Nicholson has submitted a plan to council showing them how the building could be converted into hotel/motel accommodation.

Orange and District Historical Society secretary Liz Edwards said it was about the only building from the former base hospital left.

"It's our link with the past. If there is no good reason to demolish it then let's try to preserve it," she said.